An increase in the price of a stock you own isn't the only way to make money from it. If you're bearish on a stock and believe the price will drop, you can short the stock. Shorting a stock involves borrowing shares at the current price to sell them immediately and repurchase them later at a cheaper price to pocket the difference. For example, if you borrow shares of a company at $100 per share and sell them and the price drops to $80, you can repurchase the shares you borrowed and make a $20 profit per share.
A short squeeze occurs if a shorted stock's price increases instead and sets off a chain reaction. If you short a stock, you're obligated to return those same shares, regardless of how much you have to pay to get them back. So, the stock's price rises, and at some point, investors will want to cut their losses and repurchase the shares before they continue to increase. If lots of investors do this, it increases the demand, which in turn sends the stock's price up even more, creating a short squeeze.
A stock's float is the number of shares available for the public to buy and sell. The short percentage of a float is the number of shorted shares from the total amount of available shares, and it can give insight into how investors view the company. A high float percentage -- generally 20% or more -- shows investors are generally bearish on the company.
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Gogo
Gogo (GOGO 0.87%) provides in-flight internet services for commercial and business aircraft. As of Feb. 15, 2022, Gogo's short percentage of float is 27.23%, even after recording record financials for the fourth quarter and full year of 2021. Gogo brought in $92.3 million in revenue in the fourth quarter, up 19% year over year. For the full year, the company brought in $335.7 million, a 24% increase from 2020.
While airline travel is still down due to the coronavirus pandemic, it's bound to rebound eventually. And as the global leader in connectivity services, Gogo is in a position to benefit from the bounce back -- especially when it comes to business travel. As the company invests in 5G capabilities (partly thanks to its projected $25 million to $45 million in free cash flow in 2022), its long-term potential remains positive as the market leader.
NASDAQ: GOGO
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Lemonade
As of Feb. 15, 2022, Lemonade's (LMND 2.14%) short percentage of float is 36.60%. The company -- which offers homeowners, renters, car, pet, and life insurance -- is down more than 80% from March 10, 2021, to March 10, 2022. In the fourth quarter of 2021, Lemonade brought in $41 million in revenue, which is more than double what it made during the same period in 2020. For the full 2021 fiscal year, the insurance company made $128.4 million in revenue, up from $94.4 million in 2020.
Lemonade's success in disrupting the insurance industry will likely depend on how well it can compete in the car insurance industry. Its car insurance product, called Lemonade Car, kicked off in 2021 and was aided by the acquisition of Metromile, an insurance technology company, which gives Lemonade access to tons of consumer driving data.
If the company proves it can compete in the car insurance space, it will be a catalyst to drive its business and steer toward long-term success.
NYSE: LMND
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Blink Charging
Blink Charging (BLNK 3.82%) owns and provides electric vehicle (EV) charging equipment and a network of charging services. Blink's short percentage of float is 41.98% as of Feb. 15, 2022, despite an impressive 2021. In the fourth quarter of 2021, the company boosted revenue by 224% compared to its 2020 fourth quarter, and for the full year, its revenue jumped 236%.
At its current short percentage of float, Blink is one of the top shorted stocks on the market, but that may be shortsighted. The EV industry is growing rapidly, and Blink's services and products are positioned to grow alongside the sector as a whole. The company has recently launched seven new charging products that include home, retail, fleet, and multi-home. The company has also struck a deal with General Motors to put chargers in select dealerships in the U.S. and Canada.
As the EV space evolves, Blink can become a key player, as the charging component is largely responsible for how well EVs can be mass adopted.
NASDAQ: BLNK
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