Barb,
The short interest in GUMM has averaged about 850,000 shares since the stock peaked at 16 1/2 in August 1997. I wasn't involved with GumTech back then but from the history that I have gathered from various sources, many short sellers bet that the company would go out of business and didn't cover when the stock got as low as 4 1/4 in January 1998. During the period from August 97 to January 98, the short interest increased each month from 839,811 shares in Aug 97 to 936,359 shares in Jan 98.
In February 98, a major shareholder pressured the Board of Directors to replace the CEO, President, CFO, and several Directors. Once the new management team was in place, they changed the company's strategic direction from one of building their own brand name (which failed) to one of contract manufacturing. The new strategy has paid off as one can see by reviewing the company's year to year and quarter to quarter sales growth.
Despite having new management, a new strategic plan, and improving fundamentals, the short interest in GUMM has remained relatively constant over the past 18 months, averaging about 850,000 shares. During this period, the stock based in the 4 area for about six months, moved up and found support near 6 for a few months, and finally based near 9 1/2 between Feb 99 and July 99 before breaking out of a tight trading range over the past few weeks.
The point of this data is that many short sellers entered their position before the management change that turned the company around. Many expected GumTech to fold, but instead, the company is building momentum on the heels of manufacturing agreements with Breath Asure, Heritage Consumer Products, Ranir, and Pharmagreen, to name a few. Then came Zicam and the prospect for nicotine gum, and the shorts are in trouble, IMO.
I know nothing about CUST but I seriously doubt if their story is remotely similar to GUMM. Even though highly shorted stocks may tend to underperform over time, there are always some that outperform. I have been around the market long enough to know that you can be right 99% of the time and still lose money if the amount you lose 1% of the time is so great, that you wipe out the gains on the 99% that were winners. I don't have a bit of malice in me and sincerely hope that those who are short GUMM keep a reasonable stop loss. I have a price in mind where I will bail on my long position as well. |
