Tesla (NASDAQ:TSLA) is down big today after reporting its earnings, although the decline doesn’t even come close to Fisker’s (NASDAQ:FSR) losses. Shares of FSR stock are down by 55% year-to-date and about 90% year-over-year.
The losses are due to several announcements this year. The company announced last week that the buyer of $510 million of its 0% senior secured convertible notes due in 2025 had converted $185.50 million of the notes into 159.06 million shares of FSR stock, diluting shareholders in the process. The buyer still owns $324.50 million of the notes that are eligible to be converted into common stock.
The electric vehicle (EV) company also named Angel Salinas as its Chief Accounting Officer (CAO) on Jan. 9. This happened after Fisker’s last CAO, Florus Beuting, informed the company that he would be leaving after about a week on the job. Afterward, Fisker announced that it would file its 10-Q late due to “material weaknesses in the Company’s internal control over financial reporting.”
FSR Stock Carries a High Short Interest and Cost-to-Borrow Fee
With shares down by so much, many investors are wondering if a short squeeze can bring back some of the losses. Let’s take a look.
As of Jan. 24, there were 106.06 million shares of FSR sold short compared to its float of 373.20 million shares. That’s equivalent to a high short interest as a percentage of the float of 28.42%. Generally, a short interest of 10% is considered high, while a short interest of 20% or higher is viewed as very high. It’s also worth pointing out that Fisker’s float has increased significantly compared to the reading of 214.14 million shares on Jan. 10.
Fisker’s cost-to-borrow (CTB) fee also supports the prospects of a short squeeze. The fee rises when short seller demand is high and falls when it is low. Fisker’s CTB fee tallies in at 22.12% and was as high as 34.44% on Jan. 16. Meanwhile, the average stock has a CTB fee between 0.3% and 3%.
With that in mind, FSR’s short interest and CTB fee support the potential for a short squeeze. At the same time, predicting a short squeeze is extremely difficult and should not factor into the decision process when buying a stock for the long term.
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.
