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Why Is National Beverage Surging 27% Higher Today?

By Rich Duprey - Jan 27, 2021 at 12:27PM

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Shares of the owner of La Croix sparkling water are showing some fizz of their own.

What happened

Shares of National Beverage (FIZZ 4.33%) 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 -4.79%) 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.

Bottle of champagne exploding

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.

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Stocks Mentioned

National Beverage Corp. Stock Quote
National Beverage Corp.
FIZZ
$48.64 (4.33%) $2.02
GameStop Corp. Stock Quote
GameStop Corp.
GME
$135.21 (-4.79%) $-6.81

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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