Short selling involves getting your broker to lend you shares for a short period in anticipation that the stock price will drop so that you trade the shares once you have received them. You will then buy back the shares at a low price before repaying your broker. Short sell penny stocks are risky because you can easily find yourself in the middle of a short squeeze.
Therefore, the moment a short seller sees green in any of their preferred stocks, panic may start to creep in. The short sellers will be forced to sell, which will put pressure on the stock. This can cause more short sellers to leave, and so the cycle continues. While a short squeeze can be a nightmare to short sellers, it nevertheless can be exactly what regular investors are looking for, as it allows them to buy the stock on the cheap if they predict a short squeeze play in advance. Here are 4 short sell penny stocks that investors should keep an eye on:
4 Short Sell Penny Stocks to Watch as Markets Jump: Sorrento Therapeutics Inc. (NASDAQ:SRNE)
Sorrento Therapeutics stock has a short float of 20.68% and has gained around 47% over the past week. Recently, the company commenced a program to develop a decoy coronavirus vaccine, called STI-6991. Currently, the company is engaging the FDA’s Centre for Biologics Evaluation and Research on IND-enabling research on manufacturing, clinical protocol, chemistry, and endpoints necessary for the vaccine to receive accelerated approval.
The company plans to apply for human trials after the FDA has provided guidance on this. The vaccine is an I-Cell candidate that involves replication of the human erythroleukaemia K562 cells expressing SARS-CoV-2’s membrane-destined S1 protein. The vaccine will offer B and T-cell protection against COVID-19.
4 Short Sell Penny Stocks to Watch as Markets Jump: AMC Entertainment (NYSE:AMC)
AMC Entertainment has been hit hard with the coronavirus outbreak following the closure of all its businesses. The debt-ridden cinema chain might soon be staring at another huge problem after its creditors hired lawyers specializing in debt restructuring. The lenders have hired the Gibson, Dunn & Crutcher law firm to offer advice on expected discussions about restructuring.
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The company acquired Nordic Cinema Group and Carmike Cinemas, which made AMC a world leader. However, these acquisitions left the company with a debt burden of around $4.9 billion. Currently, according to the recent reports, the company has $276 million in cash. Its stock has gained 47% in the past four trading sessions and has a short float of 42.98%.
4 Short Sell Penny Stocks to Watch as Markets Jump: GoPro Inc. (NASDAQ:GPRO)
GoPro stock has gained 20% from its recent lows, and the stock has a short float of 22.38%. At the start of this week, the camera maker launched a #HomePro Challenge for those stuck at home because of shelter-in-place laws following the coronavirus outbreak. The company has asked people to share their creative moments while indoors for a chance to walk away with a Hero8 Black or max camera as a 5-year subscription on the GoPro Plus service.
To participate, users need to download the GoPro App and use the app to capture photos or videos. Then, share these photos on Facebook, TikTok, YouTube, or Instagram with the hashtags #HomePro and #GoPro. The company will select five winners each day until the end of April.
4 Short Sell Penny Stocks to Watch as Markets Jump: J.C. Penney Company Inc. (NYSE:JCP)
J.C. Penney stock is up 27% in the past week and has a short float of 35.07%. At the end of March, the company announced that it would furlough most of its hourly store workforce from April 2. Previously, the company indicated that its stores will remain closed until April 2, but it now seems they will remain closed for some time.
The departmental store retailer announced that it will furlough employees at the Salt Lake City Office and the Soho design studio and also the salaried store employees as of April 5. J.C. Penney, which has close to 90,000 employees, has furloughed its supply chain and logistic employees since March 20. The company has also implemented cost-cutting measures that include using the revolving fund credit facility funds.
Key Takeaway
These short sell penny stocks have considerable potential for short sellers to take advantage of. However, traders need to be keen because this is risky, and they can easily find themselves in a short squeeze.
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