Superconductor Technologies (SCON) Stock Squeezes Shorts After Shareholder Letter

Superconductor Technologies SCON Stock News

Superconductor Technologies, Inc. (NASDAQ: SCON) is headed for the top in the market this morning, with gains reaching over 100% early on. The gains come after a shareholder letter seems to have triggered a short squeeze.

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SCON Stock Rockets After Shareholder Letter

Late yesterday, Superconductor Technologies issued a letter to its shareholders. In the letter, the company said that the Annual Meeting has been adjourned until today at 8:45 am. The delay was to allow additional time for investors to exercise their voting rights by submitting their voting instructions.

The purpose of the vote is for the company to move forward with a reverse stock split that brings the price of the stock above the $1.00 minimum bid requirement. In the letter, the company said it needed another 1.5% of outstanding shares to vote in favor of the move to assure passage.

Messages across message boards seem to suggest that the reverse split will take place as many seem to be voting in favor of the move. Of course, if the reverse split does take place, SCON will trade over $1.00, curing its compliance problem and allowing the stock to continue listing on the NASDAQ. But why the massive gains?

Well, the news seems to have triggered a short squeeze.

Prior to today, the short percentage of the volume on the stock was about 25%. That’s a big chunk. When the value of a stock rises, those who are short start to lose money. With such a high short interest on SCON, when the stock started to tick up after the release of the shareholder letter, sharts started losing their shorts, racing for cover.

Ultimately, this led to a short squeeze, producing the dramatic gains seen from Superconductor Technologies today.

The Bottom Line

From the reverse split perspective, I believe that investors will vote in favor of the split, allowing the stock to maintain its listing on the NASDAQ and the liquidity that comes along with it. Looking at today’s move, this is a clear short squeeze. There could be room above, but beware that when short squeezes happen, gains usually taper off pretty quickly. So, be careful.

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