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Why Clover Health Could See A Big Short Squeeze

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Why Clover Health Could See A Big Short Squeeze

S3 Partners, an analytics firm that specializes in reporting market data, said in a report this week that Clover Health (NASDAQ: CLOV) has a high short percent of float of 144.73%, which caught the attention of many retail traders on Twitter and Reddit.

Since GameStop’s (NYSE: GME) insane run in January, many investors have been trying to find the next short squeeze. Some are pointing to Clover Health to be the next stock that sees a massive price spike.

See Also: 8 Stocks With The Highest Short Percent Of Float

What Is A Short Squeeze: A short squeeze can occur when a stock has high short interest and a low float (number of shares available to purchase). If the stock rises, the shorts are forced to purchase shares or go long on the stock to cover their short position. This causes the supply of shares to become even more limited, thus raising the price of the stock even further.

Short Volume Ratio: Clover has a short volume of 1,634,528, with 5,760,263 total shares available, according to market data site Fintel. This indicates a short volume ratio of 28%. Short interest is different than short volume, as short volume only takes into account outstanding shares whereas the short interest includes the nominal value of open option contracts.

Short Seller: Hindenburg, a firm that investigates and exposes deficiencies in companies, released a short report on Clover back in February. The stock dropped about 12%, and many other investors rushed to buy puts on the technology-focused health company.

CLOV Price Action: Clover Health's stock traded up 7.8% to $7.98 at publication time. The stock debuted in June 2020 and has a 52-week high of $17.45 and a 52-week low of $6.31.

 

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