In my last article on Archer Aviation (NYSE:ACHR), I mainly discussed the company’s backstory, as well as the many factors that bode well for the future performance of ACHR stock. However, not everyone’s a fan of this electric vertical takeoff and landing (aka flying car) stock. Archer has become one of the most heavily shorted stocks out there.

Back in August, the company was the subject of a scathing short report. There’s even been litigation filed related to this exhaustive critique. With all of this at play, you may be concerned that it really is just “hope and hype” backing the bull case. I wouldn’t jump to that conclusion. The short side is not necessarily on the money here.

ACHR Stock and its Legion of Skeptics

Per Fintel, 21.2% of Archer Aviation’s outstanding float has been sold short. The short side of this trade has clearly become very crowded. As recently as May, short interest with shares was not high, and it was only starting in August that short interest really climbed.

That’s not surprising, as it was on Aug. 15 that vocal short-seller Grizzly Research dropped the “short report” on ACHR stock I hinted at above. Referring to the company as a “lame duck,” the analysts at Grizzy made many allegations against the company.

These included allegations that Archer made misleading statements, including statements made regarding its winning of a major contract from the U.S. Department of Defense.

The Grizzly critique, interestingly, enough, had littleaffect on shares at the time of its release. However, in the past month, the report has had a negative impact on shares.

Why? As InvestorPlace’s Chris MacDonald recently discussed, a shareholder litigation-focused law firm has filed a class-action lawsuit against Archer, based mainly on the allegations made by Grizzly in its report. Shares have fallen by around 18.5% since the lawsuit news.

Critiquing the Critique

It’s not just the shareholder litigation news that has weighed on ACHR stock in recent weeks. The prospect of interest rates staying “higher for longer” has likely also weighed on the stock, given how this factor has weighed on other speculative growth plays.

Yet while perhaps not the sole reason Archer shares have performed poorly lately, this factor, coupled with the high short interest, could make one hesitant to enter a position.

I wouldn’t jump to conclusions that the skeptics have dismantled the bull case, and that shares are in for steep, permanent declines from here.

Many of the allegations made by Grizzly and other critics entail variables par for the course with early-stage companies, such as longer-than-expected commercialization timelines, as well as shareholder dilution during the pre-revenue stage.

We will only know for sure about the most serious allegations, when the shareholder litigation is resolved.

Grizzly may believe that established aviation and automotive companies are backing this name simply to receive shares at a discounted price, but does it sound realistic that such respectable names would go into business with this company if it were truly a “fly by night” operator?

The Takeaway

While the short-side may be basing their wagers on a flawed bear case, let’s be clear. I wouldn’t buy this stock, merely in the hopes of a short-squeeze.

Although much of the float has been sold short, and any bit of positive news could unexpectedly spike shares higher, shares could remain under pressure until such a positive surprise emerges, making approaching this as a short-squeeze trade fairly risky.

That said, if you are looking to make a long-term investment in ACHR stock, on the view that this company is making the right moves today, in order to be a leading name in what could in the coming decades scale into a trillion-dollar industry?

Don’t let the crowded short-side scare you off. Feel free to enter a small, speculative position.

ACHR stock earns a B rating in Portfolio Grader.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.