In Samuel Beckett’s “Waiting for Godot” Vladimir and Estragon wait under a tree for Godot to arrive, much like retail long shareholders wait under the Buttonwood tree for a short squeeze to occur. The squeeze might not have occurred today but may appear tomorrow so they will stay long another day.
There have been squeezes in some of the meme stocks like GameStop Corp (GME) but although stock prices have risen in many of these stocks, they are still waiting for large scale short squeezes to occur. Like Beckett’s character The Boy, reddit message boards keep telling them that Godot, or the squeeze, may come tomorrow and so they wait.
The definition of a “short squeeze” is a decrease in shares shorted from buy-to-covers by short sellers due to large mark-to-market losses or exorbitant stock borrow financing costs. If a stock’s price rises but shares shorted do not decrease meaningfully there is no short squeeze, but rather the price move is due to long side buying pressure.
Two new stocks that meme long shareholders are waiting for are Support.com Inc (SPRT) and Vinco Ventures Inc (BBIG). Both these stocks have had large recent runups in their stock price producing large mark-to-market losses for short sellers, expensive stock borrow fees and high Short Interest % Float. These factors have produced a 100/100 Short Squeeze Score in our new metric. If losses continue to mount, shorts will be squeezed and begin to buy-to-cover.
One unusual characteristic that these two new meme stocks have in common is that the total shares shorted in each stock is relatively small in contrast to recent average trading volumes. If a short squeeze does occur, the effect of the buy-to-covers may have a minimal effect on their stock price.
The original meme stocks continue to be short squeeze candidates. AMC Entertainment Holdings Inc (AMC) shorts are down -21% in mark-to-market losses over the last seven days and down -17% over the last month. GameStop Corp (GME) shorts are down -25% over the last seven days and down -28% over the last month. Both these OG meme stocks continue to be strong short squeeze candidates.
Two meme stocks whose squeezability has decreased recently are Cassava Sciences, Inc (SAVE) and Skillz Inc (SKLZ). SAVA shorts are up +22% in mark-to-market profits over the last month and SKLZ shorts are up +29% over the last month. If the stock prices of these two stocks rebound and shorts start to incur mark-to-market losses their squeezability will increase.
Vladimir and Estragon and the meme long shareholders continue to sit under their trees waiting for Godot or a short squeeze, we will have to wait till Act 3 to see if any of them arrive.
Looking at short selling trends over time provides insight into overall market sentiment as well as the strength of bearish conviction in individual equities. Our Blacklight SaaS platform and Black APP provides an up-to-date view of short selling and short covering on an equity, sector, index, or country-wide basis allowing investors\traders to better manage their existing long and short positions.
Research Note written by Ihor Dusaniwsky, Managing Director of Predictive Analytics, S3 Partners, LLC
For deeper insight into short side data and analysis contact me at Ihor.Dusaniwsky@S3Partners.com
For short side data and access to our research reports go to https://shortsight.com/ .
Click for 10 Day Complimentary Access to Bloomberg/S3 Black App Pro
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (“S3 Partners”) to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks, and merits, as well as the legal, tax, accounting, and investment consequences, of such decisions.