Inexplicably, shares of automotive original equipment manufacturer (OEM) component producer Unique Fabricating (NYSEMKT:UFAB) popped dramatically higher on Friday. At one point, UFAB stock gained 90% before settling around 80% in the late morning hours. Unique’s leadership was just as confused, apparently, issuing a statement reflecting no knowledge of any catalysts.
Specifically, Unique — which focuses on manufacturing foam, rubber and plastic components utilized in noise, harshness management and sealing applications for various industries — stated the following: “The Company has no news to announce at this time that would account for the recent increase in trading activity of its shares of common stock.”
Indeed, with that being the only sentence to address the sharp spike in UFAB stock, investors understandably were left speculating as to the main contributors. From a cursory glance, Unique ranks among the literal penny stocks, with shares trading hands below 40 cents. At the time of writing, this price point translates to Unique carrying a market capitalization of just under $5 million.
Given the low price point, it’s relatively easy for a sizable group of retail investors to push UFAB stock higher. Notably, while the average volume for UFAB sits at 4.75 million shares, on Friday, volume hit nearly 122 million shares.
UFAB Stock May Enjoy EV Gambling Sentiment
Another possible explanation for the blistering rise of UFAB stock centers on — what else? — short-squeeze speculation. From Fintel data, the headline print isn’t very impressive: short interest of 1.99% of the float and a short interest ratio of 0.2 days to cover.
However, UFAB’s off-exchange short volume ratio stands at 54.71%. Also, looking at availability at a prime leading brokerage (which is not comprehensive, to be clear), the latest readout shows no shares available to short. Also, the short borrow fee — or the fee paid to borrow shares for shorting activities — stands at an elevated 113.01%.
Typically, short borrow fees range from 0.3% to 3% per year. However, during periods of extreme demand, this metric can skyrocket.
Fundamentally, speculators may be betting that UFAB stock will benefit from the broader electric vehicle rollout. Examining Unique’s website, it lists major automakers like Toyota (NYSE:TM), General Motors (NYSE:GM) and Tesla (NASDAQ:TSLA) as enterprise-level clients. Given that these companies and so many others are either leading the EV transition or pivoting toward it, Unique might end up being a downwind beneficiary.
Why It Matters
Before chasing UFAB stock on a possible — but of course not confirmed — catalyst of the continued national EV rollout. Data from S&P Global Mobility shows that the average age of passenger vehicles on U.S. roadways hit a record 12.5 years this year. Per the AP, this dynamic suggests that people are holding onto their cars due to stifling inflation. If so, this factor may negatively affect the EV rollout.
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On the date of publication, Josh Enomoto 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.