Short sellers of Tupperware Brands (NYSE:TUP) stock have been absolutely decimated the past week, with shares now up over 400%. There doesn’t seem to be any material announcement driving this run-up in price. Rather, the meme stock crowd seems to have gotten ahold of TUP stock.
In fact, Tupperware’s most recent press release conveys a negative tone. On June 7, the New York Stock Exchange notified Tupperware that it was in noncompliance with its continued listing policies. Specifically, the market capitalization of TUP over a consecutive 30 trading-day period was less than $50 million. Its stockholders equity was less than $50 million as well. Furthermore, Tupperware’s average closing price was less than $1 based on a consecutive 30 trading-day period. According to NYSE policies, Tupperware will have six months to regain the $1 threshold.
TUP Stock: Cost to Borrow Fee Surges
Interestingly enough, Tupperware’s cost to borrow (CTB) fee has risen in accordance with the price of TUP stock. The CTB represents the annual fee that short sellers must pay to borrow stock. On July 21, the fee tallied in at 12.70%, which is higher than normal but not excessive. Today, the CTB fee is 75.49%, marking a rise of 494%.
The CTB fee rises when short seller demand is high and falls when it is low. At the same time, a high CTB fee could also contribute to a short squeeze. This is because a higher fee lowers the chances that a short seller will emerge profitable. When the fee rises to excessive levels, short sellers may sell out of their position by buying the underlying stock in a bid to avoid the fee.
In April, Tupperware announced that it would implement changes to improve its capital structure and liquidity position. This includes “right-sizing efforts, monetization of fixed assets, cash management, and marketing and channel optimization, to preserve or deliver additional liquidity.”
Simultaneously, the company also issued a going concern warning due to its delay in filing its 2022 10-K, or annual report. Tupperware noted that a violation of its credit facility covenants was likely to occur, on top of a cash crunch caused by rising interest rates.
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On the date of publication, Eddie Pan 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.
