These stocks have the right conditions to trigger short squeezes.
Short squeezes have been among the most popular and controversial topics on Wall Street in the past couple of years. In early 2021, groups of online stock traders on Reddit began orchestrating targeted buying campaigns in some of the market’s most heavily shorted stocks in an attempt to trigger short squeezes. A short squeeze is a large, short-term spike in a stock’s share price that occurs when a significant number of short sellers are forced to buy shares and exit their positions all at once. Here are nine stocks primed for the next big short squeezes, according to Ortex Analytics.
Lightwave Logic Inc. (ticker: LWLG)
Lightwave Logic is a technology company developing next-generation electro-optic polymers to increase the efficiency of internet infrastructure by converting data into optical signals. Prominent short seller Kerrisdale Capital singled out Lightwave in June in a series of Twitter posts in which the firm said Lightwave has been stuck in the “development stage” for 30 years and its photonic device will “probably never come out.” Lightwave shares ripped higher by about 1,400% in 2021, demonstrating its short squeeze potential. Ortex estimates that about 17% of the company’s float, or free-trading shares, is currently held in short positions — suggesting significant short squeeze potential.
Charge Enterprises Inc. (CRGE)
Charge Enterprises is a group of companies creating connectivity infrastructure. At first glance, it’s easy to see why short sellers would be skeptical of Charge. The company has been public for more than a decade, but it has operated under “a variety of different names,” according to its website. In addition, it has traded over the counter until recently listing on the Nasdaq in April 2022. After an initial spike related to the upgrade, the stock is now trading back down where it was prior to joining the stock exchange. Charge’s short interest is about 8% of its float, which is enough short interest for a significant squeeze.
AppHarvest Inc. (APPH)
Agriculture technology stock AppHarvest went public via a merger with a special-purpose acquisition company, or SPAC, in February 2021. The stock opened at more than $35 on its first day of trading. Roughly a year and a half later, AppHarvest shares closed at $4.03 on Aug. 3, and the stock has been a major moneymaker for short sellers. In January 2022, AppHarvest shares plummeted as much as 20% in one day, when the company reported a $60 million goodwill charge related to its investment in Root AI. AppHarvest’s short interest has grown to 24% of its float, according to Ortex.
Danimer Scientific Inc. (DNMR)
Danimer Scientific produces biodegradable and compostable plastics. The company went public via a SPAC merger in December 2020. Danimer has certainly been a popular and successful trade for short sellers up to this point. The company went public at a price of around $30 per share, but less than two years later it closed at $4.83 on Aug. 3. In December 2021, Danimer celebrated its one-year anniversary on the public market by announcing plans to sell $175 million in debt, news that sent the stock tumbling 20%. Ortex estimates that 23% of Danimer’s float is held in short positions.
Evgo Inc. (EVGO)
Evgo is an electric vehicle charging technology company that short sellers have targeted aggressively. Evgo went public via a SPAC merger in July 2021, and its shares opened at $15 following the merger. In November 2021, Bank of America analyst Ryan Greenwald downgraded Evgo to “underperform” and said the stock was benefiting from “charging euphoria” among traders, which had overly inflated the company’s share price. Greenwald set a $10 price target, and the stock has since traded down, closing at $8.91 on Aug. 3. Evgo’s short interest now stands at about 35% of its float, the highest of any stock on this list.
Focus Universal Inc. (FCUV)
Focus Universal provides “Internet of Things” hardware and software services. The company is one of the rare initial public offering success stories of 2021, pricing its August IPO at $5. Shares closed as high as $19.28 in the days following the IPO, and short sellers started piling in. Focus has the smallest float on this list at just 18 million shares, creating the possibility of an extremely volatile short squeeze if the stock regains some momentum. Ortex estimates that 10% of the company’s float is currently held in short positions. Focus closed at $14.65 on Aug. 3.
Vuzix Corp. (VUZI)
Vuzix is a technology company that designs and produces optical components, smart glasses and virtual reality gear. The company went public in May 2021, pricing its IPO shares at $20.50. In just over a year, the stock has lost about 57% of its value, closing at $8.77 on Aug. 3. Vuzix is being punished for its lack of profitability, but the company has also reported negative revenue growth in the past two quarters. Vuzix’s short interest has grown to 27% of its float, but positive news could send the stock soaring.
Lemonade Inc. (LMND)
Lemonade is an insurance technology company that is looking to streamline the way customers shop for insurance coverage and file claims. Lemonade went public at an IPO price of $29 in July 2020. After roaring out of the gates to an all-time high of $188.30 in early 2020, the stock has since skidded all the way down to a close of $22.12 on Aug. 3. Lemonade has reported impressive growth numbers, including 89% year-over-year revenue growth in the first quarter. Unfortunately, the company’s net losses also continue to rise, presenting an opportunity for short sellers. Lemonade’s short interest is now 23% of its float.
MicroVision Inc. (MVIS)
MicroVision is developing a lidar sensor — a type of device that uses lasers to detect its surroundings — for autonomous vehicles and has been a WallStreetBets favorite since early 2021. After trading as high as $28 during the peak of the Reddit trading craze in April 2021, MicroVision shares have dropped all the way back down to close at $5.50 on Aug. 3. The meme stock got a 30% boost in March when the company announced a new patent for “alteration of resonant mode frequency response in a mechanically resonant device.” It’s unclear what significance or value the patent has for MicroVision. Meanwhile, the stock’s short interest is up to 24% of its float.
9 stocks primed for short squeezes:
— Lightwave Logic Inc. (LWLG)
— Charge Enterprises Inc. (CRGE)
— AppHarvest Inc. (APPH)
— Danimer Scientific Inc. (DNMR)
— Evgo Inc. (EVGO)
— Focus Universal Inc. (FCUV)
— Vuzix Corp. (VUZI)
— Lemonade Inc. (LMND)
— MicroVision Inc. (MVIS)
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9 Short Squeeze Stocks That Could Take Off in August originally appeared on usnews.com
Update 08/04/22: This story was published at an earlier date and has been updated with new information.