The two-month chart for MicroVision (NASDAQ:MVIS) is rather incredible to digest. In early May, shares of MVIS stock traded at less than $2 per share. Fast forward to a week ago, and those same shares broke through the $8 level.
Thus, one might expect such a massive short-term move to be met with some level of skepticism from investors. Short sellers tend to watch for such moves and time their entry to capture the downside. Accordingly, today’s plunge of 25% in MVIS stock is one that’s clearly made short-sellers some money. This move came on an announcement that MicroVision would be issuing $75 million in stock in a bid to seemingly take advantage of this wild ride higher in its equity valuation.
In fact, this trade appears to be getting very crowded. According to data from Fintel, approximately 30% of MicroVision’s float is sold short, and there are currently no shares available for short sellers to borrow at a “leading prime brokerage.” This suggests that sentiment could shift in the other direction if retail investors and short squeeze speculators start buying the stock en masse. We’ll see.
With that said, let’s dive into what to make of the massive moves in MVIS and whether this stock can be traded one way or the other.
MVIS Stock Continues Wild Swings, Down Over 25% Today
The kinds of wild moves that can produce 300% returns in five weeks and then erase a fourth of those gains overnight aren’t necessarily inviting to long-term investors. Of course, short-term speculators who have correctly predicted the direction of these moves may be much more enticed to participate. And judging by how heavily-shorted this stock is, speculators appear to be amping up their bets on this stock to the downside.
Now, the particular catalyst that led to Today’s decline is one that simply makes sense to long-term investors from a fundamental standpoint. The ability to utilize a short-term rally in a company’s stock price to raise capital makes sense. However, given how heavily-shorted this stock is, perhaps an increase in the number of shares outstanding could allow short sellers more opportunity to put downward pressure on this stock.
Additionally, it’s unclear at what price level this offering will take place or when it will happen. Accordingly, this uncertainty appears to be enough to compel many investors to head for the sidelines. That certainly makes sense, particularly for those looking to bank the gains seen in recent weeks.
On the date of publication, Chris MacDonald 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.
