Viveve Medical Inc (NASDAQ: VIVE) is having an incredibly strong day in the market today, gaining around 100% early on. While the company hasn’t issued any news today, there is a reason for the run. It seems as though the gains are the result of a short squeeze. Here’s what you should know:
Leading Up To The Short Squeeze
A short squeeze is the result of a heavily shorted stock finding its way to gains and forcing short sellers to cover. In general, before a short squeeze, we see tremendous declines as short sellers push values toward the bottom.
In the case of Viveve Medical, there’s a good reason that the stock has been dropping. At the end of the day, the company has been hemorhaging money and is quickly running out. As a result, in the beginning of October, the company announced an ATM fund raise.
According to the press release, the company raised $6.76 million through the completion of an at-the-market offering. The offering included the issuance of 1,004,171 shares of common stock with an average price of $6.73 per share.
Unfortunately, issuing over 1 million shares is going to lead to dilution, which concerned VIVE investors, sending the stock tumbling. Even more unfortunately, this wasn’t the last we would hear about raising funds.
On October 10, 2019, VIVE filed an S-1 with the United States Securities and Exchange Commission. Although, the company did not inform investors with regard to how many shares and warrants it will issue as a result of this offering, investors knew that further dilution was coming. As a result, the stock took yet another dive as short sellers jumped into the frey.
By the open of the market today, the stock had given up more than half of its value since the beginning of October. Nonetheless, day traders saw the floor and decided to start piling in. As they did, the price of the stock went up, forcing short sellers to buy shares to cover their positions and triggering a short squeeze.
What You Need To Know About The Short Squeeze
At the end of the day, playing the short squeeze game can become very dangerous. So, here are a few things that you should know before you decide to jump in!
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