News & Analysis

Rocket Stock becomes March’s GameStop in latest Reddit WSB short squeeze!

04 Mar 2021 | by: Kirsteen Mackay

Rocket Stock becomes March's GameStop in latest Reddit WSB short squeeze!

Rocket Companies (NYSE:RKT), a financial mortgage loan business, appears to be the latest stock target in the GameStop short squeeze run.

Shooting in my office
Rocket Companies short squeeze – Photographer: Tierra Mallorca | Source: Unsplash

Rocket’s share price soared 75% on Tuesday, as buyers piled in and pushed the shorts out. Trading in the stock was automatically halted three times due to the raging volatility. And this single day stock rise temporarily boosted the coffers of founder Dan Gilbert’s wealth by a cool $25 billion!

Why don’t short sellers wake up?

As we wrote last month, not all short sellers are bad, but they’re increasingly having to be careful as a high short float creates an obvious target for a short squeeze.

TV stock pundit, Jim Cramer, doesn’t appear to have much time for these short sellers’ lack of control:

“remember if the shorts had used puts in $RKT they could have prevented their obliteration yesterday. I cannot short or own common stocks, I am an observer”

Jim Cramer on Rocket Companies $RKT short squeeze

Tech-driven stock

The $15 billion company created $320 billion of mortgage originations in 2020. It’s a tech-driven stock providing real estate, mortgage and financial services. Its Rocket Mortgage division is the nation’s largest mortgage lender. However, short interest in Rocket stock has been mounting.

S3 Analytics said there has been a “large amount of short selling” into the stock’s recent rally. During which time short interest has been increasing to 47.9 million shares That’s a whopping 45.8% of the public float!

Rocket is also the parent company to popular mortgage lender Quicken Loans. The combination of rapid share price rise and crazy short selling activity could have come straight out of the meme stock playbook and one that the Reddit warriors were quick to jump on.

Roaring Kitty congratulates WallStreetBets on $RKT short squeeze

Rocket Companies has only been publicly listed since last summer when it launched to a mediocre reception. At IPO its share only achieved $18, which was below the target of $20 to $22. Early investors will be delighted with their perseverance as today Rocket stock is trading above $41.

How is Robinhood handling the Rocket short squeeze?

Popular trading app Robinhood experienced excruciating backlash when this short squeeze trend began in January. After the company halted buys on GameStop and several other meme stocks, investors were up in arms that they could sell, but not buy, leading to an inevitable price crash.

Gamestonk 1/2 (IG: @clay.banks)
GameStop short squeeze Robinhood – Photographer: Clay Banks | Source: Unsplash

So far Robinhood doesn’t appear to have placed any restrictions on trading Rocket stock, so hopefully it’s learned its lesson. It’s highly likely to be proceeding with caution as a Robinhood IPO is in the pipeline and insider rumours suggest it could publicly list this month.

Robinhood’s ease of use is helping the online brokerage enjoy soaring popularity as retail investors look for a quick and easy way to pile in to these heavily shorted stocks. If it plays its cards right it could enjoy very lucrative share engagement after IPO.

Valuethemarkets.com, Digitonic Ltd (and our owners, directors, officers, managers, employees, affiliates, agents and assigns) are not responsible for the content or accuracy of this article. The information included in this article is based solely on information provided by the company or companies mentioned above.

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

    More News & Analysis

    Zoom to pay $85M for privacy miscues at start of pandemic

    Zoom will pay $85 million to settle a lawsuit alleging that weak privacy controls opened too many peepholes into the personal information of users and that it was too easy for outsiders to disrupt video meetings during the early stages of the pandemic.

    BMW reaps $5.7 billion in profit, warns on parts shortages

    BMW reported 4.8 billion euros ($5.7 billion) in net profit in the second quarter, rounding out a strong earnings season for Germany’s three big automakers as global auto markets continue to recover from the pandemic — particularly when it comes to luxury cars.

    Carmaker Stellantis reports record 1H margins, $7b profits

    Automaker Stellantis on Tuesday said Tuesday it achieved faster-than-expected progress on synergies and record margins in its first six months as a combined company, despite suffering 700,000 units in lower production due to interruptions in the semiconductor supply chain.

    European economy grows 2%, ending double-dip recession

    Europe emerged from a double-dip recession in the second quarter with stronger than expected growth of 2.0% over the quarter before, according to official figures released Friday, as southern European economies previously hard hit by the pandemic showed surprisingly strong results.