Top 5 Short Squeeze Candidates Investors Should Keep An Eye On
As the likelihood of a recession continues to increase and stock prices continue to fall, the amount of short interest in stocks throughout the market continues to rise.
With high short interest also comes the potential for a short squeeze, and we’ve identified five stocks that could be prime for a big squeeze.
While being short at this time is likely a good play, certain stocks seem to be traps for shorts, with the chance of a short squeeze elevated relative to other companies.
Per Investopedia:
“A short squeeze is an unusual condition that triggers rapidly rising prices in a stock or other tradable security. For a short squeeze to occur, the security must have an unusual degree of short sellers holding positions in it. The short squeeze begins when the price jumps higher unexpectedly. The condition plays out as a significant measure of the short sellers coincidentally decide to cut losses and exit their positions.”
Here are five stock investors should keep an eye on for an opportunity to get in before a potential short squeeze starts.
1. Eliem Therapeutics (ELYM)
Primarily focused on nervous system disorders, Eliem Therapeutics (NASDAQ: ELYM) has four different programs currently going through clinical trials, but does not yet have a product on the market. Like most upstart biotechnology companies, Eliem is banking on its positive results thus far, drawing interest from major pharmaceutical companies. The investing community has a dim view of the stock, with 36% of the float being short, and the cost of borrowing on shares being 16.5%.
2. Revlon (REV)
After declaring bankruptcy last week, Revlon (NYSE: REV) has been rallying strongly. Investors seem to think the filing was a positive step for the company moving forward. However, not everyone is convinced that this rally is sustainable; more than 37% of shares are short, despite the eye-watering cost of borrowing of 172%. Until bankruptcy proceedings are finished, we won’t know if the longs or the shorts are on the right track.
3. TherapeuticsMD (TXMD)
Specifically targeting health issues experienced by women, TherapeuticsMD (NASDAQ: TXMD) was founded over a century ago. The majority of their revenues come from three products: ANNOVERA (contraceptive), IMVEXXY (estrogen supplement) and BIJUVA (estrogen and progesterone supplement). 24% of shares are short, and the cost to borrow has fallen from 75% to 28% over the last week.
4. Tuscan Holdings (THCA)
A leftover from last year’s hay day, Tuscan Holdings (NASDAQ: THCA) is one of dozens of SPACs that have yet to make their qualified transaction. When the blank check company stood up, management was targeting cannabis companies. After the bottom fell out of the cannabis market, the company shifted its focus and settled on acquiring Surf Air Mobility, a subscription-based private plane service. The company has submitted a fifth (!) request to extend its acquisition deadline due to its inability to close a deal. Investors aren’t optimistic about Tuscan’s future, with 55% of shares short and a cost to borrow of 9%.
5. Weber (WEBR)
The most recognized name in home grills was founded in 1893 but didn’t go public until 2021. Weber (NYSE: WEBR) estimates that there are currently 50 million of their grills installed across the 76 countries it operates in. Unfortunately, the stock has lost over half its value since its IPO, and shorts believe it is going even lower. A whopping 56% of shares are short, the highest on our list, and the cost to borrow sits at 50%.
Read Next: Why Nvidia’s Tech Investments Could Transform the Entire AI Innovation Ecosystem
Join the Discussion in the WVC Facebook Investor Group
Do you have a stock tip or news story suggestion? Please email us at: invest@wealthyvc.com.
Disclaimer: Wealthy VC does not hold a position in any of the stocks, ETFs or cryptocurrencies mentioned in this article.
