By Ryan Vlastelica
NEW YORK, July 23 (Reuters) – Shares of USEC Inc
gained for an eighth consecutive day on Tuesday, extending a
meteoric rise that has quadrupled the market value of the tiny
uranium company.
Traders attributed the move to an ongoing short squeeze, a
rapid gain that occurs when traders who had bet that a stock
would fall cover their bets in order to protect themselves
against further losses. Shares last traded up 15 percent at
$13.76.
The stock ended 98 percent higher in Monday’s session. Over
the past eight sessions, shares of the Bethesda, Maryland-based
company are up 331 percent.
“It looks like as more people became aware of [the rally],
the fast money got involved and proliferated the squeeze,” said
Frank Davis, director of sales and trading at LEK Securities in
New York.
In recent days, some analysts have cited the weekend
elections in Japan, where a pro-nuclear party posted a strong
showing, as a catalyst for buying the stock. However, other
uranium companies have not shown the same kind of acceleration.
Given the market cap and volume, “it doesn’t take a hell of
a lot to generate a squeeze, especially once the fast money gets
in,” said Davis.
Uranium Resources Inc gained 11 percent to $3.55
and has risen 38 percent in the last eight days. U.S. shares of
Cameco Corp fell 3.1 percent to $21.30, and in the last
several days has been basically flat.
According to Markit, about 15 percent of the company’s
shares outstanding are being borrowed for short bets. Short bets
in the stock briefly jumped to about 40 percent of the float in
early July, just after the company executed a 1-for-25 reverse
share split in order to keep its price above $1 a share to
remain on the New York Stock Exchange.
Companies that do reverse splits are generally struggling
for other reasons, and the stocks often continue a downward
trajectory.
Almost 3 million shares of USEC exchanged hands on the day,
many times the company’s 50-day average volume of about 190,000.
Based on Monday’s closing price, USEC has a market cap just
under $60 million, twice what it was at the end of last week.
The Market Vectors Nuclear Energy ETF edged 0.2
percent lower to $46.77.
(Editing by Andrew Hay)
