As bshinglepecker pointed out earlier today, short interest in AVNR increase to over 15.2M shares at the end of December:
Keeping in mind, this was before any news of production and shipping of Nuedexta, I guess this could represent cynics who were betting on production delays. Who knows.
My question for the experts is, what does a short squeeze look like? Seems to me that 15M is a very significant % of the retail float; how does this kind of thing tend to play out on the pps? Does it all happen at once, and drive the pps WAY up? And does it tend to happen around specific dates?
BW, Jean, Falconi, Gggordon... have you ever seen a buildup like this, and how does it play out assuming no bad news? I am curious.
While I can't say for sure that it's a short squeeze, look at Lee Enterprises (LEE) for the past three days. Huge short interest for years on this one. I have a rather small position, which is the only reason I keep track of it. By far, my largest position is AVNR. We'll have some fun over the coming weeks, months, and years.
Let me share with you the most profound short squeeze I was ever in or had the chance to witness for that matter.
The company was Pediatrix..stock symbol pdx if I recall correctly. It no longer trades separately..having been acquired since then. The company had numerous issues with several States atty generals over billing practices. Some suggested the complaints themselves originated from the shorts who then benefitted by the stock falling. In any event ..the stock fell from the 40~50 through maybe even 60 range to a low of about 6 or 7. I started buying it around 8 or so and continued buying it down into the 6's feeling that it was very much oversold. One day a story hit the wires that they had resolved their cases with some of the AG's..and the stock immediately gapped to about 8 within a few mins of the opening. I bought more at about 8.25 despite it being up almost 2 points within a few mins..and did so solely because of the HUGE short position that was in the stock. What came next..I have never witnessed before in all my years in the market. 8..became 9..10..11..13..15..18..TWENTY..
did it stop there? NOPE. 22..24..26..28..THIRTY. Stop there? NOPE. 31..and finally..settled in at about 32.
All before noon if i recall correctly. Now..stupid me..and I can take my lumps as well as dish it out sometimes..I sold those extra shares I had bought at around 13 to 14 on the way up. I never anticipated what was to follow. I sold half my primary position around 18 or so..but kept half the half to see the highs again. What happened was people don't realize how many days worth of trading some of these short positions represent. Their volume alone can be worth several entire days of trading in order to cover. You have the effect of that...of longs buying more and REFUSING to sell what they have..the stock feeding on itself and driving more and more buying by the shorts. The time of day this happened probably helped with many retail investors at work and not catching up on the news until the evening. So they weren't selling. But I have to tell you..what a sight it was. 6.50 or so before the open..to 32..the same day.
Now that was a short squeeze.
Thanks for a nice post. Only people who had experienced it can explain it. And you did it well. Now, only I can convince you to talk about how we can get to $5 first, then $8, then $10, then $12, and so on . Leave the $120 (pie in the sky) for now. Bring it up once in a while to get the blood going.
You do represent great value to this board and undeterred enthusiasm
Hi Vacationcharlie- hope all is good for you.
Regarding your question and what a significant question it is. First I would like to say I’m not exactly an expert but do take a great interest in such matters of the short position as do a few others here, having said that, here are some views and considerations I take into account.
No need to tell you AVNR Pharmaceuticals is basically a drug research and development company and now is moving into sales in its own right. The nature of what AVNR carries out as a business IMO is in a volatile sector, particularly for a relatively small company, where the success or failure could be based on one drug. Larger Pharma companies would have several drugs and the failure in just one would not have such an adverse impact. Hence I feel the swings in the pps would be much greater in the smaller companies and possibly be prone to easier shorting of stock.
Have the shorts ever been squeezed here over the last few years I have my doubts. Lets take a look at a few recent events as an example a) the short interest prior to approval 10/29/10 was in the region of 12M shares, did they get squeezed, it certainly does not look like it as the pps was driven down to 1.31, a nice get out clause. Now move on to 11/01/10 the price at its high is 5.80 following approval news, a nice opportunity for the shorts to take up a new position, possibly again 12M. On the following day the high is 4.8 pps, once again nice work if you can get it. For the last example go back to the 08/11/09 and look at the price history, I have put a link below. You may wonder why that price action on the 08/11/09, that’s another story if you can find my post at the time you may form your own opinion from it, very significant IMO.
From what I gather 3M additional short shares appear to be added in around the last two weeks. According to the pps range over the time I make the average price around 4.3. I do not have to tell you that to profit from that the pps needs to get below 4.3. I have not attempted to work out the remaining 12M short share price, which could be in the same region perhaps. Now if the total short shares are controlled by say a few masters, is it at all conceivable that a similar occurrence to the examples given take place, bare in mind we have a huge milestone event coming up with the launch.
Personally I do not fear such things as the short position at all. Being prepared for all eventualities I would see such events as the examples given taking place, as a possible buying opportunity, if they do not we may be lucky and see that short squeeze but I’m not holding my breath on that, if it does great. You are probably aware of what power and strength can be applied to move the share price in either direction by the big players, the significant volume on the example days given will bare witness to that.
IMO no matter what goes on leading up to and just beyond the next crucial stage the launch, I shall be holding on with both hands or possibly adding to my postion given the right opportunity for the good times ahead.
All the best
Do not bet on a single massive short squeeze. Rather it might be in many small installments with each bringing a small rise in pps. Look at tuesday action. It was definitely some shorts covering their positions. More to follow and with each such covering expect a decent price buildup leading to the announcement/ earnings date. IF there is a huge spike after that be sure that new short positions will be taken to bring it down again. As for your original question of a short squeeze which seems very unlikely to me the pps can go up two to three times in a day or two with minor pullback which I think is impossible to time.