Artelo Biosciences Inc (NASDAQ: ARTL) is screaming for the top in the market this morning, trading on gains of nearly 100% in the premarket hours. While there has been an SEC filing, there hasn’t been any press releases. Moreover, the SEC filing surrounded an offering, which rarely leads to gains.
So, what’s the deal?
Yesterday, Reddit users on the Wall Street Bets page waged a war on hedge funds shorting biotech companies. With heavy short interest, this seems to be a battle among this war. That’s right, it’s yet another massive short squeeze. Here’s what’s happening:
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- Artelo Biosciences Stock Climbs in a Clear Short Squeeze
- The Gains Could Be Far From Over
- What Analysts Think About ARTL Stock
- Risks to Consider Before Buying ARTL Stock
- Final Thoughts
Artelo Biosciences Stock Climbs in a Clear Short Squeeze
As mentioned above, there has been no catalystic news issued by Artelo Biosciences that suggests the stock should be moving for the top. Nonetheless, in today’s market, news isn’t always necessary.
Ultimately, this looks to be another short squeeze in the war being waged by retail investors against hedge funds.
The biotech targets started yesterday, when members of the Wall Street Bets Reddit waged war on hedge funds shorting biotech stocks. BioCryst Pharmaceuticals was the first biotech target, which saw dramatic gains yesterday.
Now it seems as though ARTL stock is the next in the running, and it makes for a great short squeeze target.
At the moment, short volume sits at about 30% on ARTL, which means the stock is heavily shorted. When a heavily shorted stock begins to tick up, those who shorted the stock start to lose money, leading them to buy shares to cover their positions. Ultimately, if all stars align, this leads to a strong increase in volume and quite a bit of price appreciation.
So, it only takes a group of retail investors to target the stock all at once to make this happen, and that seems to be taking place today.
The Gains Could Be Far From Over
While the gains in the stock are already impressive, we could see quite a bit more upward movement out of ARTL.
First and foremost, we talked about the heavy short interest. About 30% of the volume on Artelo Biosciences stock is sold short. That’s about as heavy as short interest gets, but that’s not the only factor that makes the stock a great target for a short squeeze.
Beyond the short interest, the stock only has 15.71 million shares outstanding and a public float of 13.65 million shares. That’s an ultra tiny float. This is where the law of supply and demand comes in.
With such a tiny float, it doesn’t take much to tip the scales of supply and demand. As shorts start buying shares to cover their short positions, demand ticks up, and with very little by way of supply, the price has nowhere to go but up.
All in all, between the heavy short volume and the minimal supply of shares, this is a match made in heaven that could result in significant growth far and beyond what we’re already seeing from the stock.
What Analysts Think About ARTL Stock
There aren’t many analysts covering the stock. In fact, there’s only one. However, that analyst rates the stock a Buy. Moreover, there’s no information publicly available surrounding price targets.
Nonetheless, this is a common occurrence in the penny stock space. At the end of the day, the company is essentially too small to garner analyst attention.
Risks to Consider Before Buying ARTL Stock
When you invest, no matter what you invest in, you’re accepting risk. That’s no different when it comes to ARTL stock. Some of the most significant risks to consider include:
- Volatility. As a penny stock, ARTL is riddled with volatility. This makes entrance and exit decisions difficult and opens the door to potentially substantial losses over a very short period of time.
- Clinical Stage. Artelo Biosciences is a clinical stage biotechnology company. That means that the company doesn’t have any approved therapies on the market and does not generate revenue. As such, it must depend on the cash it has in the bank to survive. If that’s not enough, it may move forward with a dilutive offering, leading to declines. Moreover, as a clinical stage company, there’s potential for clinical failures, which could also lead to significant declines.
- Regulatory Risk. Once the company makes it through all stages of clinical development, it must apply for regulatory approval to market its treatments. Should regulatory agencies find holes in the data, significant losses may be the result.
In such early stages, I’m not sure that I’d make any sort of long-term investment in ARTL stock. Nonetheless, the short squeeze that’s happening this morning is difficult to ignore and the opportunity may be far from over. All in all, ARTL stock is one to watch closely.