There’s no denying that this has been an awful week for Spirit Airlines (NASDAQ:SAVE). Shares dropped faster than a small plane making an emergency landing when news broke that a federal judge had blocked JetBlue’s (NASDAQ:JBLU) $3.8 billion strategic acquisition of the discount airline based on antitrust concerns. This development sent SAVE stock into a nosedive; since then, it has made no progress toward recovering. Since then, fears of bankruptcy have abounded amid rising speculation that the company has reached the end of its line. However, whenever things look this grim for a struggling stock, short squeeze speculation tends to rise as well. And short interest in SAVE stock is fairly high.
This doesn’t mean that a Spirit Airlines short squeeze is guaranteed or that it will save the company. However, the new data on short interest in SAVE stock is worth a closer look, especially given the obstacles Spirit is facing.
A Short Squeeze for SAVE Stock?
Despite a rocky start to trading today, SAVE stock is on an upward trajectory. It still remains in the red by 14% as of this writing, but shares have definitely reversed their direction. This isn’t because Spirit has any good news to report. It is more likely that this momentum is due to short squeeze speculation from retail investors.
Short interest in SAVE is currently high. According to data from the short analysis platform Fintel, it is currently at more than 17%. Short sellers currently have just 0.43 days to cover their positions. Fintel’s short squeeze score for SAVE is 74.15 out of 100, marking a fairly high short squeeze likelihood. As Fintel notes:
“The Short Squeeze Score is the result of a sophisticated, multi-factor quantitative model that identifies companies that have the highest risk of experiencing a short squeeze. The scoring model uses a combination of short interest, float, short borrow fee rates, and other metrics. The number ranges from 0 to 100, with higher numbers indicating a higher risk of a short squeeze relative to its peers, and 50 being the average.”
With Spirit’s many problems, it would certainly make sense that short sellers would be closing in. Spirit certainly has the makings of a short squeeze, as it faces a highly uncertain future that may include bankruptcy and/or liquidation. It’s entirely possible that the r/WallStreet Bets crowd will mark it as their next target, but even if they do, that doesn’t guarantee the squeeze will last or generate any substantial gains.
As of this writing, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
