What happened
Shares of Paysafe (PSFE -0.62%) 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.
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.
