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Most Shorted Stocks Update: Here Come The Microcaps

Tyler Durden's Photo
by Tyler Durden
Wednesday, Jan 27, 2021 - 07:44 PM

Late on Friday, in what could be the most profitable post in our 12 year history, we hinted (since we are not "advisors") to all those who had missed what we thought at the time was the "unprecedented" move in GME stock (which in retrospect was merely an appetizer to the main course which has since sent the stock 6x higher to $385 today) to look at all the other most shorted small cap companies in the Russell 3000 - specifically those with a short interest at 50% or more of float listed below....

... and buy an equal-weighted basket of these, to wit:

For those who wish to gamble their next stimmy check and frontrun the next reddit-raid, the best move would be to buy equal amounts of the 10 companies (ex GME) and just wait for the short squeeze panic to unroll. Yes, there is a risk that the entire stimmy will be lost, but that would require logic and fundamentals to matter again... and we just don't see that happening any time soon.

Just three trading days later, this basket has more than tripled in value. To all those who put it on, congratulations. 

Of course, since then this trade has blown up, and in addition to just the most shorted stocks listed above we now know that at least one more hedge fund - Maplelane Capital - in addition to Melvin Capital (which blew up and only a bailout from Citadel and Point72 prevented a disaster), has been dragged into the fray, after we published its publicly disclosed puts last night, which has given retail traders an even broader universe of companies to squeeze.

Which has brought up an interesting point: when looking at the most shorted names - based on some screening metric, like Short Interest as a % of Float for example - it depends which data source once uses. For example, in the table above we used CapitalIQ, a very useful service for doing quick screens.

So to extend the possible list of short squeezes we decided to rerun the same screen of most shorted companies (this time without a market cap limit) but using Bloomberg instead of CapIQ.

The results were interesting: while most companies from the two screens overlapped - including GME, BBY, ANC, FIZZ, DDS, GOGO, SRG and so on, there were also some even smaller companies that we never noticed initially...

.... such as Saddle Ranch Media (SRMX) - whose stock costs one-hundredth of a nickel (probably for good reasons) and which "is a diversified media and entertainment company operating three divisions: Saddle Ranch Digital, Saddle Ranch Film, and Saddle Ranch TV", and KYN Capital Group (KYNC) - a "capital-finance leasing company"  and both of which are pink sheet, microcap companies - the first has a market cap of just $9MM and, according to Bloomberg, a short-to-float ratio of 129%, or just below that of Gamespot...

... while KYNC is a $15MM microcap, which according to BBG has an even more ridiculous 399% SI/Float ratio.

As a note: these are certainly "worthless" stocks and are trading where they are trading for a reason... but as the events in the past few days have shown, none of that actually matters in a bubble where the only thing that does matter is flow of capital.

Which begs the question: as the dash for (shorted) trash continues, and with r/wallstreetbets ravaging the usual "most shorted" suspects within the small cap Russell 3000 universe, is it about to move to the micro-cap pink sheets, where liquidity is even more non-existant and one squeeze raid can send a stock orders of magnitude higher than ever GME, and make anyone an overnight millionaire?

We hope to find out shortly.

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