Stone Energy Corporation SGY 5.77% shares are trading higher by 300 percent on Wednesday after the company reported it has completed its financial restructuring.
After a previous 10-to-1 reverse split in summer of 2016, the new restructuring will effectively result in another 5.67-to-1 reverse split for Stone shareholders.
The stock was subsequently upgraded to Buy by National Securities.
While those two headlines are certainly good fundamental news for Stone Energy shareholders, there’s likely more at play behind the company quadrupling its market cap overnight.
Back in January, Benzinga reported on the explosive potential that stocks with high short interest and a low float can have.
DryShips Inc. DRYS 12.74% is a prime example of the power of the high short/low float combo. DryShips shares jumped from under $4 to above $100 then below $10 within a matter of days back in November. Like Stone Energy, DryShips’ float was drastially reduced via a series of reverse stock splits. EnteroMedics Inc ETRM 2.01%, another low float/high short stock, skyrocketed more than 1,320 percent in the first six trading days of 2017 to as high as $30.41. Today, the stock is back down below $6.30.
In January, Benzinga identified Stone Energy as one of the six stocks with the most explosive upside potential due to its elevated short interest of 44.8 percent and its minuscule float of only 4.5 million shares. It took less than two months for Stone Energy to demonstrate that explosive potential, and traders that were in on the move are realizing exceptional gains on Wednesday.
For trades looking for the next epic short squeeze, here’s…
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