2021 Edition of "Retail Investors Beat Short Sellers" Replayed? This is the List of the Most Shorted Small-Cap Stocks in the U.S. Market

"The atmosphere of 2021 is back... the market feels crazy," a Goldman Sachs trader lamented about the current market frenzy.

Recently, a wave of retail speculation is sweeping the U.S. stock market, with a "Meme stock" short squeeze drama comparable to the 2021 GameStop saga being reenacted. Retail investors are targeting small-cap companies that institutions have heavily shorted, attempting to replicate the classic script of "retail investors beating the shorts" from back then.

After the real estate technology company Opendoor surged 312% over six trading days, Wall Street began to focus on the next batch of heavily shorted stocks that might face a squeeze. Currently, the proportion of call options trading in the U.S. stock options market has soared to 70%, reaching a new high since the "epic retail short squeeze" event in 2021.

According to Goldman Sachs trader Ryan Shakey, call options account for nearly 70% of the total market trading volume, "which hasn't been this high since the era of meme stocks in 2021." This data is reminiscent of the "retail revolution" triggered by GameStop four years ago, indicating that speculative sentiment is rapidly heating up.

Heavily Shorted Small-Cap Stocks Become New Targets for Retail Investors

Against this backdrop, small-cap stocks with a market capitalization between $10 million and $1.5 billion and a short interest exceeding 25% of the float are becoming the next targets for retail investors hunting shorts.

According to Bloomberg's filtered data, 40 stocks that meet the criteria for high short interest have emerged. These companies span multiple industries, including biotechnology, retail, and robotics.

Among them, BEELINE HOLDINGS has a short interest ratio as high as 166.77%, topping the list. The company's market capitalization is only $18 million, and its stock price surged 31.1% last week.

Following closely is NEOVOLTA (NEOV) with a short interest ratio of 81.22% and a market capitalization of $160.4 million. The gaming company SKILLZ (SKLZ) has a short interest ratio of 81.02% and a market capitalization of $113.3 million.

Other notable high short interest targets include: 1-800-FLOWERS (FLWS) with a short interest ratio of 69.39%, which surged 29.7% last week; VOR BIOPHARMA (VOR) with a short interest ratio of 58.72%; and WOLFSPEED (WOLF) with a short interest ratio of 47.55%.

Analysis indicates that most of these companies have poor fundamentals, but the high short interest provides ample "fuel" for a potential short squeeze. When stock prices unexpectedly rise, short sellers are forced to buy to cover their positions, further driving up the stock price and creating a self-reinforcing upward cycle

"Meme Stocks" Surge Back in the Market, Analysts Warn of Irrational Exuberance Risks

Following the surge of Opendoor, the "meme stock" craze is spreading to more targets. Wall Street Insights previously reported that the stock price of department store retailer Kohl's doubled shortly after the market opened on Tuesday, with a total trading volume of 183 million shares, which is 25 times the 25-day moving average trading volume.

In the options market, the stock ranked among the top ten most active targets, with a total trading volume of 360,000 contracts, a 12-fold increase compared to the daily average. Call options became the main focus, with the most active options betting on the stock price rising above $17.50 before Friday.

Social media has once again become a gathering place for retail investors. On the WallStreetBets forum on Reddit, posts encouraging the purchase of heavily shorted stocks are rampant. "Let the shorts feel maximum pain, buy on the dips. We are strong when we unite," one user wrote.

In the face of the escalating speculative frenzy, Wall Street analysts have issued warnings. Mike Bailey, research director at FBB Capital Partners, cautioned that current market sentiment is "heading towards irrational exuberance," with investors showing little concern for the rising risk factors.

Kim Forrest, chief investment officer at Bokeh Capital Partners, bluntly stated, "These stocks have many fundamental issues, but the crazy collective action reflects the behavior patterns of retail investors who hope to profit from it. Volatility has its two sides; the massive surge of meme stocks will always recede."

Risk Warning and Disclaimer

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