Ballard Power Systems (BLDP), a major supplier of Plug Power, also soared in sympathy. What was the catalyst for the incredible investor enthusiasm? Plug Power's CEO, Andy Marsh, told MarketWatch that he will announce the signing of an additional order in North America with a global automaker in two to three weeks.
That's it, no names, no numbers, no kiss and tell, and if you're scratching your head wondering why the shares would move 15% higher, much less a 57% jump, you haven't been paying attention. Plug Power is trading on extreme emotion and leaving an enormous wake of scorched portfolios in the process.
You will want to review my short sale trade idea using options or stock on Real Money Pro to take advantage of the current short squeeze.
After 25 years of studying markets, I don't recall the last time an announcement of an announcement had a similar impact other than pharmaceutical stocks. The fundamental numbers don't support and won't sustain a price level above $7, but it doesn't matter. Plug Power entered a perfect storm for a short squeeze as I will explain.
Shares rose from $4 to almost $12 within the span of a couple of weeks, creating an epic short squeeze. It's easy to see why after short interest went from about 3 million shares to more than 22 million shares in six months. The shares traded recently at $6.78, down $1.70, or 20%.
On March 11, when the stock was trading at a 52-week high, Citron Research issued a blistering indictment against the bull thesis that came just short of declaring the Marsh, the CEO, a manipulator.
Citron Research's 50 cent valuation opinion sent shares spiraling lower and likely increased short sales. That in turn set up round two of the short squeezes. After Marsh stated the company will announce details of an additional automaker order, short-sellers rushed for the exits, spiking shares.
I understand why Marsh was motivated to halt the falling share price and to burn short-sellers (and maybe Citron Research), but for long-term investors and potential investors, the extreme price volatility is a serious turnoff. Conservative buy-and-hold investors aren't attracted to one-day pop and drops, and building a strong base of investors is one of the keys to sustainable price growth.