Mobile cloud-computing company Phunware (NASDAQ:PHUN) is up today on news the company is taking action to limit short selling. Indeed, PHUN stock is up nearly 7% at the time of writing.
So, what’s going on with Phunware lately?
Well, this morning the Texas-based company announced it will provide additional resources to retain shareholder value. Specifically, the company has released an online form that prevents shareholders’ brokerages from loaning out or “shorting” Phunware securities. By filling out the form, shareholders can prevent their brokerages from lending out their Phunware-related assets.
Matt Aune, chief financial officer of Phunware, commented on the importance of limiting short selling.
“While many retail investors hope the price of their shares will go up, many don’t realize their brokerage may be loaning those same shares to short sellers who work in opposition to price appreciation or that they can often restrict this practice by not allowing brokerages to loan out their shares.”
What else do you need to know about Phunware’s latest actions against short selling?
PHUN Stock Gains Amid Efforts to Curb Short-Squeeze Threat
Short selling refers to investments against a particular stock or security. Should the value of a stock go down from the time investors “shorted” the stock, they will make a profit by buying the shares at a lower price than they previously sold them. As such, short sellers are essentially borrowing shares from brokerages to sell, under the expectation they will buy the shares back at a reduced price at some point in the future. By filling out the form, PHUN owners can prevent their brokerage from lending their securities of the company, which would typically indicate a short-sell initiative.
If you recall, short selling earned nationwide attention last year as several brokerages saw major losses on their short positions. Indeed, a group of Redditors on the popular forum r/WallStreetBets collaborated to artificially boost several stocks they viewed as undervalued. This includes companies like GameStop (NYSE:GME) and AMC (NYSE:AMC), which many brokerages held strong short positions on. As you might imagine, as AMC and GME rose, a number of brokerages logged virtually millions in losses. This is considered a “short-squeeze,” and typically punishes those with short positions in a company.
Phunware’s initiative against short selling has certainly proved fortuitous for the company thus far. Currently, the company has a short volume of roughly 7.3 million shares, with a short-interest ratio of 0.4. This reflects a fairly strong interest in shorting the stock. By filling out the form, PHUN owners can attempt to curb further short investments into the company, which generally hurt its share value.
On the date of publication, Shrey Dua did not hold (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.
