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Why Paysafe Stock Surged Today

By Joe Tenebruso - Jun 25, 2021 at 4:44PM

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Could this be the next Reddit short squeeze candidate?

What happened 

Shares of Paysafe (PSFE -2.21%) jumped 9.9% on Friday, boosted in part by positive mentions of the digital payments company on Reddit and other social media sites ahead of its inclusion in a popular stock index. 

So what

Paysafe will be added to the Russell 3000 Index -- which comprises the 3,000 largest U.S. stocks -- after the market close today. In turn, managers of funds that track the index will need to purchase shares of Paysafe.

A person is pointing to an upwardly sloping line that's above a flatter line.

Image source: Getty Images.

Some Reddit traders are attempting to front-run these purchases by fund managers. Others are hoping that the rally will force short-sellers to close their positions by buying back the shares they shorted. A short squeeze of this nature could accelerate the gains in Paysafe's stock price, at least temporarily. But with only about 7% of Paysafe's share float currently sold short, the likelihood of a powerful short squeeze materializing is unlikely. 

Now what 

Looking beyond these short-term trading dynamics, Paysafe appears to have a bright future. It's a leader in the rapidly expanding iGaming market. Key customers include online sports betting operator DraftKings and leading game-streaming platform Twitch, which is owned by Amazon. Management sees Paysafe's revenue rising to more than $1.5 billion in 2021 and increasing at double-digit rates in the years thereafter, fueled by the continued growth of its core markets and potential acquisitions. 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Joe Tenebruso owns shares of Amazon and has the following options: long January 2023 $2,400 calls on Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Paysafe Limited Stock Quote
Paysafe Limited
$2.21 (-2.21%) $0.05, Inc. Stock Quote, Inc.
$142.10 (-1.85%) $-2.68

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