Shares of Archer Aviation (NYSE:ACHR) stock have enjoyed a spectacular year thus far, returning over 150% for shareholders. In August, the electric vertical take-off and landing (eVTOL) company announced that the Federal Aviation Administration (FAA) had provided its Midnight aircraft with the Special Airworthiness Certificate. This certificate will allow Archer to begin flight test operations of the aircraft.
On top of that, the FAA has initiated the process of approving certification plans for the Midnight, which, if successful, will allow Archer to begin “for credit” testing of the piloted Midnight aircraft. This testing will likely begin early next year.
If all goes well, Archer’s Midnight will be the first ever eVTOL aircraft delivered to a customer as part of its AFWERX contracts, which has a potential value of up to $142 million. The company expects to provide the U.S. Air Force with its Midnight aircraft by the end of 2023 or early 2024.
Is ACHR Stock Setting Up for a Short Squeeze?
Archer’s 150%-plus return this year has evidently attracted short sellers. As of Sept. 15, short interest tallied in at 21.6%, which fell from the reading of 21.9% on Aug. 31. The current short interest is equivalent to 32.47 million shares sold short with a value of $209.92 million. This number of shares would take 3.3 days to fully cover. Generally, a short interest above 10% is viewed as high, while a short interest above 20% is viewed as very high.
At the same time, ACHR’s cost to borrow (CTB) fee has remained relatively stable since Sept. 25 and currently tallies in at 4.98%. The CTB fee is the annual fee that short sellers must pay to borrow shares. A high fee indicates elevated short seller demand, while a low fee indicates the opposite. The average CTB fee for a stock ranges between 0.3% and 3%.
Archer’s CTB fee is elevated but still not extremely high, while its short interest is very high. As previously stated, short sellers may believe that ACHR stock’s run-up this year is excessive, especially given that the company generated zero dollars in revenue last year. Revenue is again expected to be $0 this year and then $5 million in 2024.
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.
