Electra Meccanica's Crazy Week Continues

Electrameccanica Vehicles Corp SOLO is the latest example of the powerful market combination of a low float and high trading volume.

Shares were trading higher by another 24 percent Thursday and are now up 331 percent in the past five trading sessions. With no major news out from the electric vehicle company, it’s likely market dynamics that are fueling the incredible rally.

The stock has been halted multiple times this week on a circuit breaker.

What Happened

Electra Meccanica is one of a number of low-float stocks that have experienced major short-term rallies on little or no news in recent quarters. When shares start to rise, a flood of momentum traders coupled with a limited float can lead to parabolic spikes in share price.

The only bit of news from the company in recent days has been a Bloomberg article highlighting the company as potential competition for Tesla, Inc. TSLA. CEO Jerry Kroll told Bloomberg the Canadian Electra Meccanica has discussed potentially taking over the General Motors Company GM plant in Oshawa, Ontario, which is scheduled to close this year.

Kroll also said Tesla’s $40,000-plus Model 3 is not an EV solution for the average person like the $15,000 Solo is.

“This company is producing the car that Elon Musk wishes he were building," Kroll said.

Related Link: Riding Solo: EV Startup Electra Meccanica Aims To 'Close The Last Gas Station'

Why It's Important

The Bloomberg coverage is seemingly not enough to trigger a stock to skyrocket 331 percent percent in a single week, so it’s likely the move has been mostly technical in nature.

According to Yahoo Finance, Electra Meccanica has only 237,400 shares held short for a short percent of float of just 2.7 percent. Those numbers suggest a short squeeze is likely not the culprit behind the large move.

However, the stock’s 10.9 million-share float is relatively low for a stock being covered by Bloomberg, and a huge jump in trading volume this week explains the extreme volatility. As of 11:16 a.m. EST Thursday, Electra Meccanica’s daily trading volume was already 23.1 million shares compared to its long-term average daily trading volume of just 929,000 shares.

Traders will be watching closely to see if Electra Meccanica gives back some of this week’s float-driven gains after the Bloomberg spotlight fades.

At time of publication, the stock was trading around $5.32 after finishing last week at $1.22 a share.

Photo courtesy of Electra Meccanica.

Posted In: BloombergCanadaelectric vehiclesElon MuskJerry KrollNewsShort IdeasTop StoriesTrading Ideas