Re: NTOP Short Interest --> Short Squeeze ?^? ?(?¨?)? ?^?
Short interest is unfortunately only measured once a month. The short interest date for October was the 15th -- NOT October 8th as incorrectly reported by Yahoo (Refer to the article from the WSJ at the end of this post confirming the 15th).
From the short interest data for NTOP, it is clear that the number of shares short has been increasing significantly towards October 15th (the last measured date).
NTOP Net2Phone
Month SharesShort Avg Daily Volume
10/99 2,345,051 1,415,473
09/99 1,783,985 4,481,538
08/99 484,219 3,140,295
Furthermore, when compared to the the float of 5.4M shares, 43.5% of the float was short!! A common rule of thumb when looking for a ripe short squeeze is if 25% or more of the float has been shorted. NTOP's ratio of short interest to total float is a textbook example of a short-squeeze waiting to happen.
The key issue here is to be able to make an educated guess as to whether or not those shorts a/o Oct 15th have had a golden opportunity to cover, or are they still holding their position.
Generally if the short interest measurement date occurred when a stock reached a short-term high or had spiked up, you can assume those shorts may have already covered if the stock price subsequently has fallen back, giving shorts ample time to cover.
On the other hand, if:
1. Share price stayed the same or meandered in a trading range, OR
2. Potential for bad news (e.g. 10K filing late) suddenly appeared.
then, it is likely the shorts are still hanging on waiting for confirmation of their original premise that the stock is going to tank.
It is therefore worthwhile to review the price at which NTOP was changing hands on October 15th: The October 15th close was at $22 5/8, which is not too far above current levels. This would suggest that shorts have NOT yet had a sharp drop in NTOP share price for which they originally took their short positions.
Even more promising is the delay of the release of the 10K and uncertainty surrounding the market's ability to digest 6.3 million shares in the SPO give shorts more bait to hang in their short positions or to add to their short positions. The longer NTOP is able to hold its ground, the more likely these shorts will be forced to capitulate.
My suggestion to NTOP management would be to hasten the release of ANY positive PR they can in order to blast these short parasites out of the water. A substantial upward spike in NTOP would draw in momentum investors and buoy NTOP share prices even higher. I have no doubt that during the forthcoming holiday season, e-commerce stocks are going thru the roof.
Here is the WSJ article on short interest:
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October 27, 1999
Money & Investing
Short Interest on Nasdaq Increases 5.2% to Record
By DANIELLE SESSA
Staff Reporter of THE WALL STREET JOURNAL
NEW YORK -- The stock bears placed a record number of bets last month that share prices on the Nasdaq Stock Market can't sustain their lofty heights.
The level of short sales outstanding on the technology-laden stock market rose 5.2% to a record in the latest month.
The level of short sales not yet closed out, known as short interest, increased to 2,281,748,483 shares on Oct. 15 from 2,169,435,046 shares in mid-September, according to Nasdaq. The figures include Nasdaq small-capitalization and large-capitalization stocks.
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