Getty Images (NYSE:GETY) stock rocketed overnight last night, up 200% from its merger price. Now, shares are up more than 100% this morning. This comes just five days after the stock image licensor came public via a special purpose acquisition company (SPAC) merger.
Getty returned to the public market on July 25 after completing a merger with blank check company CC Neuberger Principal Holdings, which had traded as PRPB stock. Shares of PRPB stock fell 13% the day after the completion of the merger was announced. The first day of trading was also quiet; shares fell another 2%.
Today’s jump from $10.50 to as high as $27 overnight came after it came out that the public float was just 500,000 shares after completed redemptions. According to Barron’s, the Getty family owns about 41% of GETY stock while Koch Industries owns about 19%.
Here’s what investors should know moving forward.
What’s Happening With GETY Stock?
This year, SPACs have become relatively unpopular. After a big boom of interest last year, many turned out to represent bad bets, with insiders cashing out.
Getty may be different, however, having used the $875 million in proceeds from its merger to remove fixed commitments from its balance sheet, “including about $700 million in preferred equity commitments” from Koch.
This means anyone who borrowed GETY stock earlier in the week to sell it later has less stock available to buy than expected. For traders on Stocktwits, this means there may be a big opportunity to squeeze those shorts by buying GETY stock. The redemptions dropped the stock available for trade from 8 million shares, according to one trader on Stocktwits.
What Comes Next
So, what happens next with Getty Images and its stock? The risk here is that the price of GETY stock now lies well above its fundamentals. Last year, the company earned just 13 cents per share on revenue of $918 million.
At today’s opening price of $26.48 per share, the 500,000 shares available were worth more than $13 billion. Some of the squeeze traders have suggested buying Getty warrants; they climbed past $1 overnight at one point.
Still, what goes up on a short squeeze goes down when the squeeze is done. If you want to play this one, watch the action very closely.
On the date of publication, Dana Blankenhorn 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.