What happened
Retail traders today are moving beyond just names like GameStop (GME 2.00%) that have been the focus of the group attempting to band together and drive highly shorted stocks higher. Three electric vehicle (EV) names are jumping by double digits today, and all of them are technically in a position to experience a short squeeze. As of 1:40 p.m. EDT, shares of these highly shorted EV stocks were moving as follows:
So what
Social media followers of Reddit's WallStreetBets forum have been targeting various stocks since late January, when GameStop shares soared more than 1,600% in just a two-week span. Traders disassociated the stock from the underlying business and attempted to force holders of short positions in the company to cover their positions and buy back shares, driving up the price.
Several new names have joined that list of targeted names, it seems, and Workhorse Group, Lordstown Motors, and XL Fleet fit the bill with a high percentage of shares outstanding held short.
Chevrolet pickup truck converted to plug-in hybrid by XL Fleet. Image source: XL Fleet.
Now what
As of mid-May, the percentage of outstanding shares held short for Workhorse Group, Lordstown, and XL Fleet was 38.5%, 19%, and 16%, respectively. And likely not coincidentally, shares of the three EV companies have jumped over the last month.
Data by YCharts
These gains come as some old questions remain, and new ones have arisen, on the underlying businesses of these companies. Workhorse Group said it only shipped six of its electric cargo delivery vans in the first quarter. Those deliveries brought in revenue of just $521,000, yet the company has a market cap of more than $2 billion at the recent share price after today's gains.
Lordstown's recent first-quarter release didn't do much to impress investors, either. After questions about its timeline to begin building electric pickup trucks, the company said that production will in fact begin on schedule in the fourth quarter of 2021, but volume this year would be "at best" 50% of previous estimates. In addition, the company said it is seeking to raise more capital to fund its start-up plans.
XL Fleet didn't meet expectations in its first quarter either, though the company said it expects its business of converting fossil fuel-powered vehicles to hybrid and plug-in hybrid electric drive trains to pick up in the second half of the year. XL told investors supply chain issues have disrupted customers' ability to acquire the vehicles that XL electrifies. The company said it sees improvement coming in the latter part of 2021, and that its fully electric drivetrain solution is still on track to begin shipping in 2022.
If today's move is simply part of a short squeeze, it won't last for long. And once done, the stocks should revert closer to the value that the businesses reflect. Investors in these higher-risk names should watch that, and ignore any short-term moves if their investments were made for a long-term strategy.
