There's no way that I would go long this stock. I think it would be much safer to only play it on the short side. You can cover and re-short at a higher price if you have good timing. My timing isn't so good: I tried doing that on AVNT, and have made money each time, but would have made much more just by shorting and holding.
You need to ask why the institutions liked this stock. My assumption is that it was because the company was viewed as a cash cow. According to Asensio's calculations, this is not true. I'm not an accountant, so I'm not qualified to give my own judgement, but Asensio seems to have a talent for uncovering problems with companies. Also, the Motley Fool looked at this company, and also believed the cash flow to be negative.
If I'm correct and the institutions have bought this stock strictly because they consider it a cash cow, and if they now take a second look and decide (as have Asensio and the Motley Fool) that this is untrue, they will want to exit in an orderly manner. This liquidation may take weeks or even months, as they don't want to dump it all at once and tank the stock. Also, it will be a while before the institutions are required to file SEC reports that they have sold their holdings. But I believe that it will happen, and this stock will trade much, much lower.
Please note, it's not an issue of Asensio being influential. The issue is that he alerted the world to some very strange accounting policies on the part of this company. Now that he's signalled concern, anyone who understands accounting can run the numbers for themselves. |
