Take a look at the stock market’s favourite car rental company Hertz (HTZ):
This is what you call a short squeeze.
The catalyst was an announcement they received $1.65 billion in DIP financing.
Considering the unsecured debt is still trading a tad above 40 cents on the dollar, the bond market still doesn’t anticipate the equity receiving anything when the courts approve the Chapter 11 resolution.
This information (the equity fundamentally being worthless) was already priced into the markets. What rational participants don’t anticipate is a huge wave of paradoxically “rational irrational” behaviour consisting of gamblers, coupled with those trying to induce a short squeeze, which is what we are seeing.
A very fascinating display of market dynamics for the textbooks!
On a MUCH smaller scale, the common of Medallist, a tiny, struggling REIT, briefly went up around 400% on Thursday–and is still up more than 100% today–on news that it would pay a dividend on its preferred stock. This was based on some retail confusion as to what preferred stock IS (many common holders seemed to think they would be getting a dividend). Side note: the preferred stock offering included a holdback to fund the first few dividend payments, which will be exhausted soon (I vaguely recall next quarter, but could be wrong), so holders shouldn’t expect too much more from that. Kinda funny, kinda tragic.
Wow. What the hell is what I thought when looking at this one. On October 14, $518 million in stock was traded for a micro-REIT that would be lucky to have seen $10k trade in a day before then. I’m guessing all of the automated scanners that look for low-float, low-average volume gappers dived in with the result you see there. It’s not as if this was a short squeeze – short interest was around 2,000 shares at the end of September. This market has gone crazy.
Nonsensical things seem to be happening with so much more frequency these days; I’ve paid more attention to the market than I should, and what would be maybe once-every-few-months trading oddities are now happening weekly+ (it struck my own portfolio in August, when tiny Swiss biotech ADXN, which didn’t trade many days, tripled intraday on no news and massive-for-it volume of around 20k shares). I’m sure it’ll end well!