Shares of Rocket Companies, a major short-term hedge fund, rise more than 20%

Shares of Rocket Companies rose more than 20% on Tuesday in a surprising move on no clear new news. The online mortgage provider currently has big short bets against it through hedge funds and it looks like it has gained some interest from day traders on Reddit’s infamous WallStreetBets.

Nearly 40% of its available shares are sold short and according to FactSet it is close to the list of US companies in terms of the size of the short game by hedge funds. This makes it a classic target by meme-obsessed investors, who are storming together this year for shares and call options of heavily short-chain companies to squeeze out short sellers. It was unclear at the time how large the retail stake in Rocket was.

A number of popular posts on WallStreetBet chat room hosted Rocket on Tuesday. One says, “I like RKT. $ 1.7 million all-in, let’s go YOLO,” and it quickly garnered more than 1,700 comments.

“It’s 38% short … When people see it, they think you can beat the sellers,” CNBC’s Jim Cramer told Squawk on the Street, adding that he’s actually from Rocket Companies’ management and business basis.

‘I was a big fan of [CEO] Jay Farner en [Chairman] Dan Gilbert .. and honestly do not understand why the stock did not respond to a very good response, where they basically set out a story that just said, ‘We can show how it rises when our rates, not us did not harm business. If rates fall, it does not harm our business. ”

The increase in Rocket may be a sign that the retail mania seen in GameStop earlier this year is still a factor. An army of retail investors on Reddit a month ago managed to push the video game retailer up by 1,500% within two weeks, which caused the hedge funds that sold out a lot of pain. The broader market has also had some impact on the madness, as many large investors have generally taken the risk.

When a stock with a short short interest rate jumps sharply higher, it can force short sellers to cover their bearish positions to limit their losses. The short coverage tends to further fuel the stock’s rise.

Rocket earned a stronger-than-expected fourth quarter on Thursday, which impressed some Wall Street analysts. Wells Fargo slightly increased its price target and increased its earnings estimate for Rocket following its large partner.

“We were impressed with the earnings in the fourth quarter, especially the resilience of their direct retail sales margins,” Wells analyst Donald Fandetti said in a note on Monday. “RKT seems to be well positioned to take market share if the environment of higher tariffs is disrupted.”

CNBC’s Kevin Stankiewicz reported.

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