Even better than a short-squeeze is a short MELTDOWN! While not defined as part of the term "short-squeeze", it is possible that in a rising market the owner of borrowed shares will want to take profits (i.e. sell the stock that has been loaned to a short). If the broker can not find replacement shares for the short position, the short is FORCED to cover! The price goes up. Another long gets tempted to profit-take, ANOTHER short gets FORCED, etc, etc.
This can only happen when the short position is a healthy percentage of the stock outstanding. Like, for instance, now. Shorting at 30+ was smart, and those smart shorters should have covered by now, unless they're insanely greedy. Shorting under 20 was less smart unless the trader is really on top of the market and willing to take profits. Holding or opening a short position at these prices is not only not smart, it's potentially suicidal. Unfortunately, I suspect a large number of individual investors, late to the party, are trying to play this game. They won't be able to stomach the losses as the price rises, thereby almost guaranteeing their own fate.
Iomega is a profitable high-growth company with new product lines, and some say a franchise, selling at less than 2X revenue. If you are itching to short something, there are lots of turkeys out there. This just ain't one of 'em! |
