Second Squeeze
The GameStop saga reminded us all what a short squeeze truly is. Jumping 100 percent almost every day, GameStop took the market by storm and created history. However, another GameStop could be in front of your eyes, in a company you likely have never heard of: Clover Health Investments.
This mid-cap company, based in Franklin, Tennessee, has made the news in the last few weeks. Unfortunately, it wasn’t the best news you would want to hear as an investor. Hindenburg Research, an investment firm known for its short-selling, released a report on the company stating them as a “broken business”. Any reminiscence of the Hedge Funds’ bashing GameStop? However, not all of Wall Street is pitted against this stock. Famed investor and billionaire Chamath Palihapitiya have consistently backed Clover, holding a 27 percent stake in the company. Chamath’s backing holds a lot of importance; in fact, he was one of the people who got into GameStop right before the short squeeze.
More importantly, this company has one thing vital for short squeezes: short interest. For those unfamiliar, short interest is the percentage of shares that are sold short. While GameStop’s short interest was approximately 140 percent, Clover Health comes in with a whopping 150 percent of shares being sold short. With that many shares short, a short squeeze is inevitable.
The last thing necessary for a short squeeze is the igniter. In GameStop’s case, the famed subreddit “Wall Street Bets” came through and bought thousands of shares in GameStop, igniting the short squeeze, and sending the stock flying. Fortunately, Clover has already breached social media. Many trading chat rooms and social media pages are talking about it, looking to buy shares in speculation. If enough stock and option volume come into Clover Health, we could be witnessing a short squeeze like never before.
With the high amounts of speculation, there is endless volatility on this unknown company. Will retail pull through again? If so, will you be buying shares?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
