Market Overview

3D Systems Buyout Rumor May Trigger Short Squeeze

3D Systems Buyout Rumor May Trigger Short Squeeze

3D Systems Corporation (NYSE: DDD) short sellers are having a rough day. Shares are surging more than 5.5 percent on the day following a DealReporter report that General Electric Company (NYSE: GE) is reportedly interested in a buyout.

For a short seller, news of a buyout is often a worst-case scenario. No matter how much research a short seller does or how poorly a company is performing, buyout offers can be extremely unpredictable and have a major, instant impact on a stock’s share price.

For 3D Systems bulls and other owners of heavily-shorted stocks, buyout rumors provide a double shot in the arm. Not only is the buyout bid typically offered at a significant premium to market price, fears of a buyout are enough to send short sellers scrambling to cover their positions. The resulting short squeeze can be a major trading opportunity.

A number of short sellers have already exited their 3D Systems positions in the past year. Short interest in the stock has declined 37.3 percent. Short covering has likely played a large role in the stock’s 142 percent gain in the past year.

Today, reports that 3D Systems still has an elevated short percent of float of 20.7 percent. There are currently more than 22.1 million shares held short with 11.2 days to cover.

If buyout rumors continue or if a deal is announced in coming days, 3D Systems still has some explosive short squeeze potential.

Posted-In: Long Ideas M&A News Short Ideas Rumors Trading Ideas Best of Benzinga


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