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Sarepta Therapeutics, Inc. Message Board

  • system_architect_enterprise system_architect_enterprise Jul 11, 2013 10:13 PM Flag

    77% held by Insiders + Institutions & 30% short interest = squeeze

    With 77% held by insiders and institutions (and rising, with a 6.04% increase last quarter) and a 30% short position, it sets things up for the beginnings of a major short squeeze since there is only 23% of the shares out there available, and a 30% short position. If the I+I hold their 77% shares, then there simply aren't enough shares to cover the outstanding short position & the squeeze will be on.

    I'll pre-emptively say NO, I'm not claiming that every single short share will be rushed to be covered at exactly the same time, I'm just pointing out that the conditions are right for a good squeeze.

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    • Another aspect to consider is that shorts may have bought protective call options, but there are only about 46,000 call contracts open through Jan 2015, which controls 4.6M shares. That is less than half of the 9.77M shares shorted, and even then it is unlikely that 100% of options are owned by shorts who wanted the option as a hedge.

      So the squeeze theory is still on target.

      • 1 Reply to stock_option_investor
      • your theory is more correct than you know

        a large portion of the current options are owned by longs, particularly the august 13 options

        in addition, an overwhelmingly large portion of the puts were sold by longs

        there is another piece of the puzzle though, and that relates to the warrants

        it is possible some warrant holders shorted the stock to lock their gain and will then exercise at expiration

        but even with this, my estimate is that at least 70% of the short is unhedged

        just like it apparently was in October, based upon what happened in the trading after the P2 release

    • Agreed, conditions are indeed right for a squeeze, and for a mega-squeeze on news of AA. Longs have been right on this one all along. The longs who have held through all the ups and downs are a very strong lot (me included), and they're not selling their shares even in the 40's. Good luck shorts - you'll need a miracle to come out of this without being sent straight to the poor house!

      Sentiment: Strong Buy

      • 2 Replies to encore7
      • I am long but AA is NOT any done deal.

      • Hmm. We seem to meet this author's criteria:
        A "short squeeze" occurs when short-sellers rush to cover their positions due to a rapid increase in the price of a stock or futures contract. Short squeezes generally occur in stocks that have small floats and a large number of short positions (relative to the float). A "short squeeze" can be caused by any number of different reasons - generally speaking, the most common cause of a "short squeeze" is an unexpected piece of good news for a company. This results in people taking new positions in the company's stock, the price rising and short-sellers deciding that they want to get out of the stock. The short-covering only adds fuel to the fire, sending the shares even higher.
        Example of a Short Squeeze: Volkswagen. Often referred to as the "mother of all short squeezes." This short squeeze temporarily gave Volkswagen the largest market capitalization of any company in the world.
        Many hedge funds were short Volkswagen, and were caught off guard when Porsche announced that it had effectively gained control of 74% of Volkswagen's voting shares. There was a very short supply of Volkswagen shares with which to cover short positions with, leading the stock to soar over the period of a week as hedge funds desperately tried to cover their positions.
        The unexpected news, combined with a very small float and large number of short positions, conspired to drive the shares through the roof. Some hedge funds are reported to have lost billions as a result of the squeeze. Final Note: A limited supply of shares is crucial for a true short squeeze. You are not going to see a "short squeeze" in a stock like Microsoft, which has billions upon billions of shares in its float. If you have a 100k short position in Microsoft, you will not have a hard time covering your position. However, if you are short 100k shares of a stock that has just five million shares in its float, you may find yourself having a hard time covering.

        Sentiment: Strong Buy

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