Rocket Companies, such as the beleagured retailer GameStop (NYSE: GME), have high interest in short sellers, or investors who bet that the share price of a particular stock will fall. Short sellers, usually professional investors, have become an enemy to Reddit users, who are commonly considered retail investors.
On February 12, Rocket’s share was actually shorter than GameStop now has, and according to MarketWatch, nearly 40 percent of its shares were held by those with a short stake. Rocket was the ninth stock with the shortest shortfall based on MarketWatch data.
A further twist in Rocket’s stock climb is a special payout to shareholders declared last week, which could cost short sellers.
Only 30 percent of GameStop’s shares are cut short. However, the Texas retailer has more than 50 million fewer shares available for trading. The pharmaceutical company Esperion Therapeutics Inc. in Ann Arbor (NASDAQ: ESPR) also stands as one of the heaviest shorted stocks, based on MarketWatch data, with more than 35 percent of its 26.9 million shares held by short sellers.
The number of short sellers interested in Rocket makes it a natural undertaking for Reddit users to give a boost: ‘With 35-40%, the moon is the limit …’, one user wrote on Monday night.
Rocket Companies CEO Jay Farner admitted in an interview with CNBC in late January that a fairly new public company – Rocket had its first public offering in August – investors wanting to make a profit against the company, does come with the area.
In that interview, he thinks, Farner sends a shot over the arc to the company’s short sellers, noting Rocket’s long history of profitability, which was more than $ 9 billion last year.
“My advice is that this is not a stock you want to be short on,” Farner told CNBC. “You might want to reconsider your position if you play it. We have an excellent record and a lot of exciting things we’re working on.”
Representatives of Rocket did not immediately respond to a request for comment on the recent stock activity.
Gilbert and other close executives control about 95 percent of the company.
In addition to the strong earnings report last week, Rocket also announced a $ 1.11 per share dividend that was payable to all Class A shareholders later this month. This dividend can serve as a mechanism for the company to wipe out short sellers with an interest in Rocket, as U.S. Securities and Exchange Commission regulations require that if a company pays a dividend, those who hold a short position, then the dividend to the company, as opposed to receiving it.
Rocket currently has more than 43 million shares sold short.
GameStop at the end of January became the first “stock” stock as retail investors and others tried to push back the cardholders of the video game retailer. The company has been struggling with profitability for years as video game sales shift away from brick-and-mortar stores to online shopping.