Top Space Stocks Experience Significant Price Surge, Potentially Trapping Short Sellers
Space Stocks at Risk of Short Squeeze as Gains Accelerate
Shares of Intuitive Machines, Inc. and Rocket Lab Corp., two of the top-performing space stocks, have surged 123% and 131%, respectively, since March 30. According to data provider S3 Partners, the rapid gains have set both companies up for potential short squeezes, a phenomenon where sellers may be forced to buy the stock back to cover their losing positions, driving share prices even higher.
The underlying reasons for the short squeezes differ between the two companies. Intuitive Machines' stock gains were boosted by a surge driven from a US Space Force contract and a $1 billion revenue outlook. The stock now boasts more than 18% short interest as a percentage of float, a measure of how many available shares traders have borrowed to bet against it. This is a highly elevated level, and alongside the stock's recent rally, has made the short trade crowded. Paper losses for traders betting against Intuitive Machines shares will fall are more than $550 million for the year, S3 data show.
Rocket Lab's squeeze setup is driven more by momentum after a more than 60% rally in a week, following the company's first-quarter revenue report that beat analyst estimates. The company also reported strong demand for rocket launches and space-related services. The quick pace of the stock's move could push existing shorts to cover even though short interest as a percentage of float is relatively low at 5.5%, per S3 data. Short sellers in the name have accumulated paper losses of about $1.9 billion so far this year.
Growing excitement around the space sector has driven attention as investors position themselves in companies seen as beneficiaries of Elon Musk's SpaceX planned market debut, Space Force and NASA space exploration and lunar contracts, and growing revenue and backlog.
Short Interest Comparison
| Company | Short Interest as Percentage of Float | Paper Losses for Traders |
|---|---|---|
| Intuitive Machines, Inc. | 18% | $550 million |
| Rocket Lab Corp. | 5.5% | $1.9 billion |
Note: Data provided by S3 Partners.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
Investor Takeaway
Be cautious of short squeezes in high-performing space stocks.
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