Electronic headphone manufacturer Koss Corporation (NASDAQ:KOSS) is yet another victim of the Reddit crowd gunning to take short-sellers down. The long-established company has been losing market share in recent years. Pushed out by the likes of Apple (NASDAQ:AAPL) with its glossy marketing and high-quality airpods. Nevertheless, it’s still profitable and caters to a small consumer base.
Koss pump and dump short squeeze – Photographer: C D-X | Source: Unsplash
The hedge funds saw an opportunity to short the company for a quick buck, leading it to be aggressively shorted in the past few months.
In January, when GameStop and AMC Entertainment were seeing major price action thanks to the Reddit fuelled short squeeze, Koss was another to see its share price soar.
Back then, the KOSS share price rocketed from around $3.34 to a high of $127. At this point, Robinhood controversially halted traders from buying, forcing the stock into freefall. Nevertheless, this month it’s seen more price volatility. Between March 8 and 10 it fluctuated between $14 and $40. And today it’s hovering around $27.
In its Q2 results Koss reported sales below $5 million, which was an 18% increase year-on-year. It hasn’t paid a dividend since 2014 and its meme stock status potentially makes it a dangerous long-term investment.
A brand steeped in history
Company founder John Koss invented the world’s very first SP/3 stereophone in 1958, bringing the personal listening experience to a whole new level.
This indicates a certain romanticism around the WallStreetBets targets like GameStop and Koss, harking back to simpler times when big tech didn’t rule the roost.
Unfortunately romance and business don’t play nicely together.
While shopping in physical stores is a shared dream in Covid-19 lockdown and wearing vintage tech may look great on an Instagram feed, it’s a fantasy. Wake up meme stock followers, it’s time to move on and usher in the convenience of online shopping and innovative tech.
Speculation, hype and greed
While the romantic narrative of the little guys coming for the big bad hedge funds may be a compelling one, it’s far-fetched. The whole setup is built on nothing more than speculation, hype and greed. It’s a fair fight for those who know the rules but be prepared to burn if it doesn’t work out.
While the electronics company has a range of desirable products, does it have what it takes to grow and flourish in the 21st century? Perhaps Koss would make a better acquisition target than a WallStreetBets target.
Koss’ market cap is around $225m, it has a low float and short interest remains around 27%. Therefore, another short-squeeze remains a possibility. But, if momentum builds and another short squeeze does take place, it seems unlikely that Robinhood would step in a second time. They’ve dealt with enough controversy this year.