Reddit stocks are usually picked for their short interest rather than their fundamentals. However, today investors are seeing one meme stock flex some real power. So which company is the winner? Cleveland-Cliffs (NYSE:CLF) is up nearly 7% on higher-than-average trading volume. With the new infrastructure deal, some share concentration, and a fair amount of short interest, investors have many a reason to go long on CLF stock.
Cleveland-Cliffs is an Ohio-based mining and metal processing company. The company represents one of the largest steel producers in North America. CLF primarily produces flat-rolled steel and iron pellets for industrial applications. The company has been rallying quite a bit in the last few days as lawmakers on Capitol Hill begin to come together on the terms of the infrastructure bill.
The bill, once passed, is sure to benefit companies in the business of construction aggregates and other materials, and Cleveland-Cliffs would be one of those tapped for supplies.
The company is also a beneficiary of the r/WallStreetBets retail trading legion, who has rallied around CLF stock in recent months due to its high short interest. The current short volume ratio of CLF stock stands at nearly 22%. The short interest prompts high trading volumes in the stock as traders attack institutional investors.
CLF Stock Gains as Company Tightens Stock Supply
With Reddit stocks, stock dilution is typically a prevalent concern. Companies like to take advantage of the uptick in buying by conducting stock offerings, often to the reluctance of the holders themselves. AMC (NYSE:AMC) is one such example; as the company looked for more capital, it offered up new stock, which costed existing holders. CLF is doing the opposite, and it is catalyzing more gains today.
Wednesday, Cleveland-Cliffs completed the redemption of its outstanding Series B Participating Redeemable Preferred Stock. The buyback, completed with existing liquidity, will see CLF’s diluted share count reduced by 10%. Putting everything together, this announcement is a big deal to retail investors, who frequently worry about dilution.
Trading volume is ramping up on the announcement today. Just hours into the session, CLF stock is seeing over 33 million shares trade hands. This is already well above the stock’s 29 million daily average volume. The stock is seeing a boost of over 7% as well.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
