Sos Ltd – ADR (NYSE: SOS) is headed for the top again in the market this morning, following up on the gains we saw yesterday. The gains come after declines late last week when short sellers at two separate firms announced their positions. Nonetheless, their short positions may lead to a massive short squeeze opportunity. Here’s what’s going on:
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- SOS Responds to Short Seller Reports
- This Short Squeeze Could Be Massive
- Risks to Consider Before Buying SOS Stock
- Final Thoughts
SOS Responds to Short Seller Reports
As mentioned above, SOS Limited had a rough day on Friday after two separate short selling firms announced they had taken positions. However, a recovery started yesterday and continues today after the company refuted claims made by the short sellers.
In the press release, SOS said that the claims made about the company were unsubstantiated. Moreover, the company said that the attacks were purposefully designed to manipulate the price of its shares, with the aim of causing stock price declines in order to benefit the short sellers to the detriment of shareholders.
Moreover, the company said it intends on vigorously defending itself against the short seller attack and allegations. It also said that it is working to prepare a more detailed response to the “false innuendo and lies that are being spread” about it.
This Short Squeeze Could Be Massive
While the short sellers may have caused pain on Friday, what they’ve actually done is create an opportunity for retail investors to band together and realize tremendous gains. Don’t forget, the team at Wall Street Bets taught us that when retail investors band together, they have the power to push hedge funds and other institutions out of their short positions.
With that said, due to the positions taken by these two firms, short positions on SOS stock increased 500% last week. While that seems like it may be painful, the fact is that it’s an opportunity.
If retail investors were to band together and push for a short squeeze, short covering alone could push the stock to prices of more than $13 per share. So, gains in multiples as the next big short squeeze begins are a very real possibility.
Risks to Consider Before Buying SOS Stock
If you’re thinking about buying SOS stock, you’re going to have to be willing to accept risk. After all, there’s no such thing as an investment that doesn’t come with the risk of loss. Some of the most significant risks involved in an investment in SOS include:
- Volatility. SOS is a highly volatile stock. The fast paced moves in the value of the stock make timing entrance and exit decisions difficult and could lead to significant losses over a short period of time.
- Cryptocurrency. SOS is involved in the mining of cryptocurrency. At best, cryptocurrency itself is a speculative play, making the stock a speculative play as well.
- Profitability. Once SOS gets all of its mining machines up and running, it should be able to easily achieve profitability. However, that hasn’t happened yet. When investing in companies that haven’t achieved profitability, there’s always the risk of dilution as these companies may look to public markets to raise funds.
Sure, there are risks to consider before diving into SOS stock. However, these risks are largely outshined by the potential brought to the table.
The fact of the matter is that short interest is flying on a stock that it really shouldn’t be. As a result, SOS stock makes a perfect target for the team at Wall Street Bets to squeeze the shorts, and if this happens, gains in multiples are likely.