These stocks are ready to be shorted.
In recent months, a group of social media stock traders has orchestrated targeted buying of some of the market’s most shorted stocks in an attempt to spark a short squeeze. A short squeeze is a large short-term surge in the price of a stock, which occurs when a large number of short-sellers are forced to close their positions all at once by buying a stock. S3 Partners just launched a metric that scores stocks by their short-term squeeze potential. The eight stocks have a score of 10 out of 10, according to S3 Partners analyst Ihor Dusaniwsky.
AMC Entertainment Holdings (ticker: AMC )
The global health crisis has completely shut down the movie theater business in 2020. AMC reported a net loss of $4.59 billion last year and entered 2020 with $5.4 billion in debt. However, social media traders got the #saveAMC trending hashtag, and shares soared. In response, AMC raised billions of dollars by selling new shares. AMC’s share count has surged more than 380% since the start of 2020, but its stock price recently hit an all-time high. According to Dusaniwsky, AMC’s short-term squeeze fireworks may have just begun, as “short sellers have covered -24.6 million shares worth $1.35 billion over the past 30 days.”
GameStop Corporation ( GME )
GameStop is the first so-called”meme” stock to grab the attention of hedge funds, the media, and even Congress in 2021. A massive short squeeze in January took the stock from less than $18 to $483 in a matter of weeks. GameStop’s short position has fallen sharply since reaching over 130% of its liquidity earlier this year. However, S3 recently reported that 19.1% of GameStop’s float remains short, which is still plenty of fuel to trigger another major short squeeze on GameStop in the coming weeks.
Beyond Meat ( BYND )
Plant-based meat substitutes maker Beyond Meat jumped to a multi-year high of $221 in a brief squeeze in January, but it has yet to produce the kind of explosive gains that AMC and GameStop are seeing in 2021. At the end of May, S3 reported that short positions accounted for 27.5% of Beyond Meat’s float. In addition to high short interest, Beyond Meat has the lowest liquidity of the eight stocks listed above — that is, freely traded shares held by non-institutional or company insiders. The low float could lead to any potential short squeeze volatility.
Skilz ( SKLZ )
Short interest in mobile gaming platform developer Skillz accounts for 69.5% of its circulating supply, according to data from Bloomberg and ZeroHedge. This number not only makes Skillz the most shorted stock on this list, but it also makes it the third most shorted mid-cap and large-cap stock in the overall market relative to its float. The new partnership with the NFL sent Skillz shares soaring to $46.30 in February, but the stock has since returned to reality. However, its short interest suggests another surge may be on the horizon.
Virgin Galactic Holdings ( SPCE )
Virgin Galactic is a commercial space tourism company led by influential entrepreneur and founder Richard Branson. Virgin Galactic was trading as high as $62.80 earlier this year before delays in the test flight sent shares plunging below $15. In late May, Virgin’s stock price rose again after completing a test flight of the VSS Unity space shuttle. Virgin’s investors seem to be stumped by Amazon’s ( AMZN ) CEO Jeff Bezos’ remark this week that Virgin’s rival Blue Origin will fly its first manned spaceflight in July. Reassured about the safety of commercial spaceflight, Virgin Atlantic’s momentum continued this week.
Upstart Holdings ( UPST )
Upstart is an online lending marketplace that specializes in personal loans. Upstart went public in December 2020 at an IPO price of $20 a share, and the stock has risen more than 230% in less than seven months. Unlike many other popular meme stocks, Upstart’s underlying business is doing well. The company recently reported a first-quarter net profit and 81.9% revenue growth. Upstart short-sellers, who have suffered heavy losses during the stock’s meteoric rise, are under increasing pressure to exit their positions.
Bed Bath & Beyond ( BBBY )
Home improvement retailer Bed Bath & Beyond is in the same boat as GameStop, but its short position is now much larger than GameStop’s. Bed Bath & Beyond is one of the most shorted stocks in the entire market, with short positions representing 33% of the stock’s float, according to data from Bloomberg and ZeroHedge. Bed Bath & Beyond’s underlying business is still struggling to recover from a shutdown in 2020, but short-sellers may already be feeling the heat of a potentially booming summer shopping season. The stock’s short rate suggests it has all the hallmarks of a short squeeze.
Nikola Corporation ( NKLA )
The short thesis by electric car maker Nikola is understandable. Nikola suffered a major blow in 2020 when founder and chairman Trevor Milton resigned amid allegations that the company misled investors. Nikola has spent much of the past year battling what the public sees as outright fraud. Partnerships with General Motors ( GM ) and CNH Industrial ( CNHI ), as well as investment from Ark Invest’s Cathie Wood, have helped Nikola regain investor confidence. Nikola stock has come back to life over the past month, and the stock’s recent rally may be just the beginning.