Electric truck maker Nikola Corporation (NASDAQ: NKLA) has gained nearly 70% since going public via a reverse merger on June 4. The stock’s performance in the last two weeks is certainly impressive, but a spike in borrow rates suggests the big move may just be getting started.
Major Squeeze Coming? On Monday, S3 Partners analyst Ihor Dusaniwsky said Nikola is rapidly approaching what could be a major short squeeze. Dusaniwsky said Nikola has already accumulated $526 million in short interest, about 5.2% of its float.
In addition to taking an aggregate $244.5 million loss on their positions so far in June, Nikoa short sellers are also paying stock borrow costs that topped 600% on Monday, according to Dusaniwsky.
At this point, S3 estimates Nikola short sellers are paying about $3.6 million in borrow costs per day just to maintain their positions.
“With significant mark-to-market losses and skyrocketing stock borrow fees NKLA is prime target for a short squeeze,” Dusaniwsky said.
The only auto stock that has cost short sellers more money in June is Tesla Inc (NASDAQ: TSLA).
Benzinga’s Take: Nikola short sellers likely see the company’s valuation as even more egregious than Tesla’s. However, Nikola bulls likely see the stock as a way to invest in a potential long-term EV giant like Tesla at a much earlier stage.
Nikola's stock traded around $66.14 at time of publication.
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