Lordstown Motors stock price sinks to a new low: But sellers beware

Summary:

The Lordstown Motors stock price forged a new all-time low last week. But as the headwinds for RIDE increase, so do the shorts. This could get interesting.

The Lordstown Motors stock price forged a new all-time low last week. But as the headwinds for RIDE increase, so do the shorts. This could get interesting.

Lordstown Motors Corp (NASDAQ: RIDE) closed at $6.37, up $0.13 (2.08%).

Last week marked a new low for long-suffering investors in Lordstown Motors. On Friday, RIDE crashed to its cheapest ever valuation of $6.06, closing out a torrid July with a 46% loss on the month.

The writing has been on the wall for some time. In the last two months, The automaker lost CEO Steve Burns, CFO Julio Rodriguez and has been accused of falsifying sales data by Hindenburg research. Not to mention June’s announcement, the company may not have the funds to remain an ongoing concern.

Oh, and then there is the Department of Justice probe into Lordstown’s SPAC deal.

In my report at the start of July, I highlighted the risk for the RIDE longs:

“That being said, it’s hard to build a bullish argument for the RIDE stock price in the current environment. The likeliest scenario is a return to May’s $6.69 low. Furthermore, there is a case to be made for the price going even lower.”

However, with the Lordstown Stock price down 35% after the report, it makes sense to highlight the risks for the shorts.

RIDE short squeeze?

The short interest in Lordstown has steadily increased over the last few weeks. Currently, 28.69% of the available float sits with short-sellers.

Average RIDE trading volume indicates days to cover of 2.8. Therefore, with just under 32 million shares betting against the price, it will take almost three days for the shorts to cover their positions.

This makes RIDE a prime candidate for a short-squeeze.

That is not to say that Lordstown has a bright future, far from it. However, it should discourage selling.

Any other year, I would have written off the stock’s chances. But in 2021, anything is possible. And therefore, a jump in price cannot be discounted. Should that happen, Lordstown will be in a position to raise much-needed capital. And whilst that doesn’t solve all of the problems, it certainly helps.

Of course, this is speculation, but then again, these stocks always are.

Whatever happens, I expect to see the stock making headlines sometime soon.