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Short Sellers Increase Bets on Clean Energy and Biotechnology Stocks
BioXcel Therapeutics, Allogene Therapeutics, Novavax, and ProKidney Corp Witness Increase in Short Interest
Short interest in BioXcel Therapeutics surged 69% during the first half of July, reaching about 43% of the company's free float. Allogene Therapeutics held the greatest short interest in the group, with about 54% of float. Novavax and ProKidney Corp also appeared on the list, with Novavax witnessing the greatest increase in short interest. However, short interest in ProKidney shares declined slightly. Alternative power companies Sunnova, SunPower, and Maxeon Solar also experienced an increase in short interest during the period.
Increase in Short Sellers Raises Concerns
The recent data reveals an increase in short interest in several stocks, with levels exceeding those seen during the meme stock craze of early 2021. This has raised concerns as it indicates a higher risk of a short squeeze. A short squeeze occurs when a stock that has been heavily shorted rises in price, forcing short sellers to buy back shares to cover their losses. This results in a further increase in the stock price.
Screening for Companies Vulnerable to a Short Squeeze
In light of the increased short interest, CNBC Pro used FactSet data to screen for companies most susceptible to a short squeeze. The list includes companies listed on the New York Stock Exchange and Nasdaq with short interest accounting for more than 25% of float and a market cap of at least $100 million as of July 14.
Carvana and C3.ai Among the Companies on the List
Shares of online used car seller Carvana witnessed a decline of about 4% in short interest, but it still hovers at around 47% of float. Carvana's shares have been volatile in recent months and have surged nearly 800% since the start of the year. C3.ai, a leading artificial intelligence stock, also made the list with short interest declining by 8.6% during the first half of July. However, about 35% of its shares are still sold short.
Groupon and Guess? Witness Increase in Short Interest
Retail stock Groupon and clothing manufacturer Guess? saw a significant increase of 10% in short interest since the end of June. This indicates a higher level of bearish sentiment among investors regarding these stocks.
Overall, the increase in short interest in clean energy and biotechnology stocks raises concerns of a potential short squeeze. Investors will need to closely monitor these stocks to assess the impact of short covering and its effects on share prices.
Conclusion
The recent increase in short interest in clean energy and biotechnology stocks is a concerning trend that could potentially impact new businesses in these sectors. This surge in short selling raises the risk of a short squeeze, where heavily shorted stocks experience a significant price increase, causing short sellers to scramble to cover their positions.
For new businesses in these industries, it is important to closely monitor the market and be aware of the potential impact of short sellers. A short squeeze can lead to a rapid increase in share prices, which could benefit companies who have a strong market position and investor confidence. On the other hand, it may also create market volatility and uncertainty, making it challenging for new businesses to navigate.
Additionally, the screening conducted by CNBC Pro indicates that certain companies are particularly vulnerable to a short squeeze. These businesses should be cautious of the potential market dynamics and take proactive measures to manage their investor relations and overall market perception.
It is essential for new businesses to stay informed about the short interest in their sector and stay updated on the activities and sentiments of short sellers. By having a comprehensive understanding of the market, businesses can better position themselves to withstand potential short squeezes and leverage market opportunities to their advantage.
In conclusion, while the increase in short interest raises concerns for clean energy and biotechnology stocks, new businesses must stay vigilant and adaptable to navigate potential market fluctuations and capitalize on favorable conditions.
Article First Published at: https://www.cnbc.com/2023/07/28/these-are-the-most-heavily-shorted-stocks-right-now.html.svg)
