What happened
Shares of National Beverage (FIZZ 0.11%) are soaring 27% higher heading into midday trading Wednesday, seemingly making it the latest stock to catch short-sellers in a squeeze.
So what
Although National Beverage's 52% gain so far in 2021 is no match for the stratospheric rise in GameStop's (GME 6.16%) shares, which are up 685% year to date, the owner of La Croix sparkling water is also a heavily shorted stock with nearly two-thirds of its shares outstanding sold short.
Image source: Getty Images.
Now what
The short interest ratio in National Beverage, or the number of days it would take short-sellers to cover their position, is a hefty 27 days (anything over seven days is considered a lot), which suggests short-sellers are being squeezed.
A squeeze occurs when a rise in the stock price leads short-sellers to buy back their shares at higher prices, fueling a further rise in the stock price, which causes more short-sellers to cover their positions.
In GameStop's case, prominent short-sellers have finally cried uncle and have completely abandoned the stock. Noted short-seller Andrew Left of Citron Research told YouTube viewers yesterday he had covered his position at "a loss of 100%."
That might not happen with National Beverage, but as old short-sellers get squeezed out, because the monumental jump in the price of the stock is not based on fundamentals, new short-sellers might end up coming in.
