That's what will hold back price rise for awhile ... people who bought in without bothering to understand the company or its trading history or its usual low trading volume ... and now want to exit with a small loss or small gain.
Referring to it as a "rigged game" says it all. You, and others, made a blind bet, not an informed trade or a investment. Normally a fall like we've experienced shakes out the weak hands, but it also attracts some even weaker hands who take a little longer to shake out. There's nothing fundamentally wrong with the company. By any metric it's way oversold.
Blaming investment decisions gone wrong on manipulation or shorts or a full moon is simply shifting the blame for a "bet" you made. It's a market. Every stock traded is moved by exogenous influences. If volatility scares you and you can't fathom ways to profit from it ... and in the case of GBX all you need to do is look at a one year chart to see it gets whipped around fairly regularly ...then play in a safer environment, wherever that might be.
I hope they're using this opportunity to buy back more shares in the $40's. Should be a profitable use of their/our cash.
I think most shorts will feel they've wrung as much as they can from this. About time for Stifel to make it's bi-weekly change in recommendation back to buy. At $5 to $6 a share, the mid $40's makes no sense. 80% of their backlog is from non-energy related equipment. No matter how aggravating, this one requires patience.
Right now the market is reacting to the word "miss." Once they figure out that the details are good and guidance remains as before, the market should respond ... even later this morning. Reading comprehension of day traders is not that great until it's explained to them line by line.
Not sure the dividend will be focus of the earnings call. And I expect most of the shorts have done pretty well sor far. Their rush to the exits should benefit those of us who are long, but if they move quickly, most shorts won't be crushed. If anyone was stupid enough to short the stock below $50, they probably will deservedly get hurt badly.
"but 30%+ short interest is quite a statement otherwise"
It may not be a statement regarding the company fundamentals but a realization that this thinly traded stock is volatile and somewhat predictable in it swings in a wide trading range.
There is a common belief that whenever a stock price goes down it can only be attributed to the nefarious shorts.
But when you read comments about the company, even from those paid to do analysis, there is a remarkable lack of even superficial understanding of the it.
Transports generally are down and anything oil or rail related is generally down. Coupling that with the Stifel downgrade (they seem to reverse their call on the stock monthly), a fair number of people have run for the exits. The percentage short hasn't changed that dramatically in the past week or two and this stock trades on a very thin daily volume, allowing day traders and algorithmic trading to profit.
Those currently short, along with the day traders and computer driven trades will also contribute to a run up in price when fundamentals kick in. For a comparatively boring business the volatility is unexpectedly high, but volatility also creates opportunity for those that understand the business and don't assume the railroads are going out of business.
Yes, there is a major sell-off in the rails and the transport sector more broadly. The SN downgrade to "hold" for GBX added to the downward pressure. but there's no reason to assume this is a company-specific sell-off.
'but right now there are clearly some very determined sellers"
You seem to assume that those selling shares are all shorts. Obviously there was and is a substantial short interest, but that was largely establish when the price was much higher. At this point there still is, obviously, selling pressure, but it's highly unlikely that that is largely due to the establishment of new short positions. If nothing else, being able to borrow shares to sell short must be increasingly problematic with a nearly 33% short already.
People who have long positions in the stock sometimes sell their shares. Whenever shares in a company sell off, those who are big fans of conspiracy theories assume that it's entirely the work of short sellers. While the greedier shorts may hope to milk some more out of this, I would expect that many of them are the ones who are buying on dips to cover their short positions and ... hopefully ... that will soon propel at least a partial recovery in the share price.
Yes, everyone knows the quote: “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful,' but inevitably the majority do the opposite ... which is why it generally works well for the minority who are contrarians.
I also thought this industry would appeal to Buffett especially with his purchase of Burlington Northern, but hard to say whether GBX or one of it's competitors would be the most appealing to him.
I doubt there are that many shorts selling at this point. At $65 or $60, yes, but below $50 it would be increasingly risky with limited potential return and I doubt there are that many shares available for shorting.
If anything, at these prices, the shorts will be covering before they get trapped at the exits.
... and I expect that's one reason the stock is being driven down before to announcement. Whoever is buying in now should see a nice, quick gain.
Earnings might not have been a big catalyst if the stock was still at $60 to $65, but at $49 the earnings and guidance ought to cause something to happen.
It's amazing there's anyone left willing to sell. I would have thought the weak hands would have falling by the side by now. Hopefully capitulation is taking place and the only ones left will be more serious investors, unwilling to help out the shorts when they're trying to cover.
"The spin off is a done deal."
Not exactly on a par with Nostradamus The devil will be in the details, not just that the deal is done.
Here's a little secret ... if you Google "Yahoo spin off" you'll be surprised at how much you will learn.
A corporation creates a spinoff by distributing 100% of its ownership interest in that business unit as a stock dividend to existing shareholders. It can also offer its existing shareholders a discount to exchange their shares in the parent for shares of the spinoff. For example, an investor could exchange $100 of the parent’s stock for $110 of the spinoff’s stock.
And even in the Seeking Alpha article the author said:
"Please note that because we're focusing on the tank car issue in particular, we'll leave out the many other positive tailwinds that we've covered elsewhere, such as the wheel repair business, growth in Brazil etc."
Yes, the Stifel analyst's call and the market reaction simply demonstrate that a lot of people who trade the stock know next to nothing about it. Hopefully more people will take the time to learn the facts and we get more shareholders who have a clue and are less likely to panic ... or someone who spots the absurdly priced stock and decides to take a stake in a large chunk of the company. Wouldn't be surprised if Stifel (once again) changes it's recommendation or, better yet, changes the analyst who covers the stock.