Short Squeeze Ahead?

[140 degrees]

As I have stated in my 'Glass is Actually Half Full' thread, I'm not a finance professional, and I'm not comfortable recommending individual stocks to friends. There are always too many unknowns for me to have that kind of confidence. It doesn't mean I can't have an opinion.

So, in my opinion, anyone short Rivian today should be concerned about a short squeeze.

1) Before today, sentiment was awful. The trolls were hammering anyone who stuck their head up. Sentiment has gone from depression to fairly positive in one day. Sentiment doesn't drive stock price so much as change in sentiment. We now have that.

2) The stock hit a new low on high volume after the production estimate badly missed analysts expectations. Price action was pretty interesting after the low. After the drop, we had several consecutive days of increasing price at low volatility and above average volume. Somebody was hoovering up shares that were leaving weak hands. There is now a very strong base around $11.

3) The short case was partly based on the impossibility of borrowing $5B without showing positive cash flow. The story was that the R2 couldn't be built until this hurdle was cleared. This pillar was substantially weakened by these statements from today's press release:

"Improved cash visibility: Cash, cash equivalents, and short-term investments expected to be sufficient to fund operations through the start of R2 production."

"Total expected Normal capacity following R2 launch and plant changes: 215,000 units of total annual capacity across R1T, R1S, EDV, RCV, and R2."

4) The short percentage of float was 22% on 2/15. High, but not extremely dangerous. I'm guessing it has gotten much higher in the 11 days since the quarterly results. Notice how the stock rose last Friday before the close, than dropped at Monday's open. That could have been short sellers who didn't want to be exposed to an open position over the weekend.

I don't short stocks. I do know that during a squeeze, the first to close their positions take a haircut. The later ones can lose more important (virtual) body parts. If you are short today, it might be time to re-evaluate your situation.

Have fun out there!

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[DuoRivians]

Doubt it. Rivian has always shown they can make great products. But they haven’t shown they can make great financial decisions so far. Rivian still needs a lot of cash before EBIT profitability. I don’t think short interest will materially change.

2026 is a long ways away and still lots of uncertainties in the EV space

 

[140 degrees]

You could be right. However, I think the probability of Rivian going to zero is a lot lower now. It is an asymmetrical risk. You could make a little money if this stock drops to 11, or lose a lot if it takes off to the upside. I think the juice is gone from this trade for the smart short seller. But who really knows?

Another way of looking at this is that today a January Call at $20 costs about the same as a January Put at $10. So the consensus among option investors is that the probabilities are similar. If I offered you a bet where the market says you have an equal chance of winning $2.50 or losing $7.50, would you take that bet?

Also, I'm not disagreeing with you about the many hurdles ahead. There will be bumps in the road, and there is still no guarantee that Rivian comes out as a big success. (I don't think you would disagree that their chance of survival looks much better today.) This is about what happens in the next few weeks. This is a very volatile stock. Right now that volatility is to the upside. Short squeezes are actionable by swing traders and option traders, not really beneficial to long term investors.

 

[Nix]

RIVN will continue to move sideways and be volatile until if/when the R2 ramp-up is proven to be successful with sustained volume sales, with sufficient support infrastructure, etc. Until then playing the timing of any market movement is just gambling.

Fun if you have money to blow gambling.

 

[Webleyaz]

It has begun. Well, I looks that way right at this moment.

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