bob,
This is what is so great about this stock. The increase in short interest to over 1 million ensures that there is a nice cushion on the downside, with a big potential on the upside. Consider that there are 15 million shares outstanding, >60% held by institutions and insiders. That leaves about 6 million in the float of which 20% has already been borrowed by the shorts. Any significant news will cause a serious order imbalance. Market makers have learnt their lesson and would hike the ask price rapidly, rather than taking up short positions themselves to fill the orders. Witness the 10 point rise at the open today. A rapid rise in price will trigger margin calls for the shorts, leading to higher bid prices or even market orders when their positions get liquidated. The position then feeds on itself until the shorts are exhausted. Anyone care to remember presstek (PRES), which did turn out to be a fraud? Everybody was short this stock in the 40s and 50s, causing the stock to go up to above 200 when the squeeze came. This can get very interesting here.
BTW, most internet companies, even "profitable" ones, are shunted by institutions. Why are there so many institutions dumb enough to buy into CUST, with "no products, no revenue, no distribution and no marketing"? |
