Martha Stewart Living's

(MSO)

business may not have hit rock bottom yet, but its stock is officially back from the dead.

Shares of the struggling media company were up nearly 9% on Wednesday, reaching not only their 52-week high, but their highest level in more than three years. The company's stock is up more than 155% since it hit is most recent nadir in May, when the company announced that its

Martha Stewart Living

television show was going on hiatus following company founder Martha Stewart's conviction on obstruction of justice charges.

Investors were hard-pressed to explain the stock's rise on Wednesday, although Scott Rothbort of LakeView Asset Management said a rumor was floating around that the combined

Sears

(S) - Get Report

-

Kmart

(KMRT)

entity might buy a stake in Martha Stewart Living.

"This stock's trading on fumes," said Rothbort, a contributor to

TheStreet.com's

sister site,

Street Insight

. In terms of where the stock will go from here, "I wouldn't even speculate," he added. (Rothbort doesn't have a stake in the company.)

A spokesman for Sears declined to comment. Representatives for Kmart and Martha Stewart Living did not immediately return calls seeking comment.

In recent trading, Martha Stewart Living's stock was up $1.77, or 8.8%, to $21.90.

Shares of Martha Stewart Living have rebounded since the company's founder was sentenced in July to five months of prison. In September, the stock jumped after Stewart decided to serve her sentence early, before her appeal was heard, and after the company announced a deal with famed television producer Mark Burnett to develop new programs and revamp old ones.

But the stock's rebound has come amid continued financial difficulties at the company. With Stewart's legal troubles weighing down the company, Martha Stewart Living has posted a quarterly loss in every quarter this year and in six of the last eight quarters. Meanwhile, the company's revenues have dropped off a cliff as subscriptions and advertising revenue have plunged at its flagship magazine,

Martha Stewart Living

.

While Martha Stewart Living officials have predicted that the company's finances will rebound after Stewart is released from prison next spring, the company has shown few signs of a turnaround to date. Indeed, the company itself predicted a wider-than-expected loss in the fourth quarter. And the company still seems to be in turmoil, recently

replacing CEO Sharon Patrick with former ABC executive Susan Lyne.

Ironically, Martha Stewart Living's negative direction may be helping the stock as much as any hope for the company's future. As might be expected for a stock that appears to be out of pace with the company's direction, shares in Martha Stewart Living are being heavily shorted. As of Nov. 8, investors were shorting 5.9 million shares, which is about 40% of the company's float, according to data from

Reuters

.

With that much of the stock being floated, it doesn't take much to get a short-squeeze going, particularly if the shorts don't have much endurance, said Steve Monticelli, president of Mosaic Investments.

"MSO is a good example of the dangers of shorting a heavily shorted stock," Monticelli said. (He has no position in Martha Stewart Living.)