Squeezing the Shorts

27 August 2007

When investors don’t like a stock, they tend to stay away from it.
When investors despise a stock, they short it.

So what should an IR department do when the “short interest” in their company sky-rockets?  In short (pardon the pun), the answer is to prove the Shorts wrong.

A recent example of this was IRIS Pharmaceuticals.  Short interest in the company ballooned to more than 14% of the shares outstanding in mid-July.  In early August the company reported that due to significantly improved financial performance they would be reducing their operating loss guidance by approximately $20 million.  Not exactly music to the ears of those nasty Shorts.  The stock reacted by gaining 30% from August 3rd to August 24th.

When pessimistic investors experience a short squeeze, it hurts.

Leave a Reply