iRobot Corp. (IRBT) filed for Chapter 11 bankruptcy protection on Sunday, and the company didn't mince words: current shareholders will be completely wiped out under the Picea Robotics acquisition plan. The equity is worth nothing. Zero. Zilch.

So naturally, some traders are getting excited.

Welcome to the bizarre world of the "zombie squeeze," where bankrupt stocks occasionally roar back to life in spectacular fashion before their final death rattle. It's a high-risk game that's less about investing and more about financial musical chairs, where nobody wants to be left standing when the music stops.

How Dead Stocks Come Alive

The mechanics behind a zombie squeeze are stranger than you'd think. Why would anyone buy shares in a company that's openly telling you the stock will be worthless? A few reasons actually.

First, heavily leveraged short sellers often scramble to close their positions as the stock approaches delisting. They don't want to be caught holding a cancelled security, so they rush to cover. That creates buying pressure.

Meanwhile, speculative retail traders pile in hunting for a "dead cat bounce," hoping to catch a quick gain before the inevitable collapse. The combination of short covering and speculative buying can trigger a vertical spike driven entirely by liquidity mechanics and pure speculation, not fundamentals.

History offers some wild examples. Hertz saw a zombie squeeze back in 2020, and Bed Bath & Beyond delivered one in 2023. Now iRobot looks like a prime candidate for another round of this dangerous game of financial hot potato.

The White Knight Fantasy

Another potential catalyst? Rumors of a "White Knight" bidder swooping in at the last minute to outbid Picea. In a zombie squeeze, the truth doesn't really matter. A single unverified social media post suggesting a competing offer could send the stock soaring 50% in minutes, logic be damned.

The Cold Hard Facts

Here's the reality check: don't confuse volatility with viability. iRobot is carrying over $200 million in debt, and bankruptcy law is crystal clear about the pecking order. Creditors get paid first. For shareholders to see even a penny, a new buyer would need to pay off every single creditor in full before equity holders get anything.

That's not happening.

Trading iRobot shares at this point isn't investing. It's passing around a lit stick of dynamite and hoping it doesn't explode in your hands. The music is about to stop, and when it does, someone will be left holding that potato. Make sure it's not you.