CoachA short squeeze is a rise in price amplified by the purchases of short sellers who cover because of losses, margin calls, recalls or risk limits, each purchase pushing the price further against those who remain.
Voorbeelden
Example 16.10 (Wolfsburg, October 2008)
On Sunday 26 October 2008 a carmaker announced that it held 42.6% of another carmaker’s ordinary shares and cash-settled options on a further 31.5%. A German state held 20%. About 13% of the shares were sold short, and 5.9% remained in the float. The price, € 211 on the Friday, passed € 1 005 on Tuesday 28 October, briefly making the company the most valuable listed company in the world. The options were the point: being cash-settled they fell outside the disclosure rules of the time, and whatever shares their writers held as hedges were not for sale.
Example 16.11 (January 2021)
Short interest in a US video-game retailer reached 122.97% of its float in January 2021. From an intraday low on 8 January to an intraday high of $483 on 28 January the price rose about 2 700%, then fell more than 86% by the end of the first week of February. The regulator’s staff report found that short sellers’ covering coincided with parts of the rise but was a small fraction of total buying, and concluded that positive sentiment, not buying-to-cover, sustained the rise: a squeeze was part of the story and not the whole of it.