I'm long and would love a short squeeze, but it won't happen. Here's why:
If you went short at 10$ which is the accepted general price of most shorts per historical analysis, then to start covering at 14 is a 40% loss. If a big short starts to cover at 14 that will drive it up to lets conservatively say 18. Assuming you covered half at 40% loss and half at 80% loss, that averages to a 60% loss. No short would be able to stay in business. They HAVE to pay the 10% interest fee on this stock and just wait it out trying to casually hedge their positions by trading the ups and downs that they are causing trying to push it down.
Its better to pay 10% interest on shares for 5 years knowing that there is a reasonable chance that this stock will plateau around 30 after it is done doing its full pop and just play the volatility while still collectiong your milliono dollar salary and having a nice office to go to rather than pay the piper now.
Don't get me wrong, i know this stock is going up as most people are now starting to realize its not the number of phones sold but rather the number of phones managed. In effect, BBRY is going to get 100$ for every phone that is out there whether it sold it or not. And that's every year regardless of whether the person repurchases a phone or not, and it doesn't matter from whom. BBRY would not care if ZTE wiped out apple and samsung....they still get a management fee of the phone.
So....this stock will advance steadily...which is fine for me and my long position, but now you know why it is not going to do an insane pop. Sure, its probably going to swing over 17 after earnings but its not going to pop over 25.
Sentiment: Strong Buy
I like your analysis but what about the big players on the long side of this? My understanding is that large holders, say somebody like Prem, have much more control of their stock being loaned to shorts and can actually be compensated for doing it. So if he loaned his shares and then waits a couple more quarters when we see real solid numbers, he, not the broker, could call in his shares.
There aren't a whole lot of shares out there now to borrow that aren't controlled on the long side by big players. So while your thesis that there are big players on the short side that will control this stock and minimize losses, I believe there a big players on long side that are looking for some big profits when the time is right.
Sentiment: Strong Buy
There will be a short squeeze wilth a high degree of certainty and here is why:
1. Sale of BB10s above Wall Street expectations
2. Blow out earnings
3. High cash flow and cash-on-hand
4. 182,000,000 shares shorted
You say it would break the system and too many rich people would take a hit? That’s ridiculous. It’s like saying the housing market could never crash because too many people would be hurt. A massive short squeeze CAN happen here and it WILL. We all know the recent classic examples. The interest charged is negligible compared to what’s at stake here. The shorts have to cover. Once the covering starts, a positive feedback effect takes place where buying begets buying. It won’t just be the shorts trying to beat each other to the exits. Tons of momentum players will enter the chase. Institutions will mainly sit on the sidelines until the dust settles and the stock pulls back to a more reasonable valuation. The overshoot though could surpass 50% as the shorts are willing to cover at ANY price. Most of this will occur in one day on Friday but the volatility will continue through most of next week. (just my 2 cents)
First, I doubt big investors are going to sit on dead money. Take a loss and move on. Second, I doubt that the loaners will opt for a 5-8% interest when then can call a stock bought in the single digits that can be sold for a double digit gain.
I'm also long but would love to have a short squeeze, and I actually bought into it before the BB10 launch. Held my shares right past 18.50, and we all know how that fiasco turned out. I applaud anyone buying this stock based on the fundamentals of the company, because my reasons for buying back in December of last year are the same reasons I believe in this company now, but if you're buying because you believe a short squeeze is coming you might as well be playing the lottery with your money.
Yes, yes i have. And in a clinical theoretical world devoid of any human influence as found in textbooks, the margin calls will start to trigger. And yes, we will see that in some of the minor players. Those that are short at 15,16,17,18 will potentially even make a profit. But in the REAL world there are plenty of options to affect your trigger of a margin call. 2 obvious examples are A. The bigger players could then start shorting even heavier, taking in all the short positions that are sold by the minor players...driving the stock back down again.....reducing the trigger threshold for a margin call. B. The really big players could suggest to the smaller brokers that perhaps the margin limits should be raised for this particular case and that they know plenty of smaller brokers that would LOVE to have their business. As a broker, charging an insane 10% on float, I suspect you are going to look long and hard at whether you want to give up a golden egg completely, or take on an additional bit of risk. Oddly, i suspect there are dozens of ways to avoid being called on margin in the REAL world.
Its going up, no doubt....with BBRY releasing their management of IOS and android ahead of earnings they are setting up a great conference call as they know they don't need this news tidbit to stem damages in the coming weeks. But this won't hit 20 by 4th of July.......i do think it will steadily advance and be over 25 by October 1st......but the bigger players will make enough money on the swings they cause to start ot offload their short positions during that time.
Sentiment: Strong Buy