Yesterday, Rite Aid (NYSE:RAD) stock had after being identified as .
Shares in the pharmacy chain rose over 31% after Fintel that 23% of the company’s stock was being held short, and 51% of its off-exchange volume was short.
RAD stock opened this morning at $2.19 per share, with a market capitalization of $127 million on annual sales of $24 billion. In early morning trading, RAD stock is down over 5%.
Rite Aid’s Still Around?
Rite Aid was torn apart in the last decade, selling half of its stores to Walgreens Boots Alliance (NYSE:WBA) after at buying it all. Walgreens had bid $9.4 billion for the whole company however, it bought nearly half of Rite Aid’s stores for $5.18 billion instead.
The sale left the chain with an untenable mix of stores on both coasts and nothing in between. There were rumors Amazon (NASDAQ:AMZN) might buy it in 2019, but those proved unfounded.
Instead, Rite Aid has drifted slowly toward a likely bankruptcy. That accelerated after the Department of Justice filed suit in March concerning its
. “Rite Aid intentionally deleted internal notes about suspicious prescribers,” the government said. The suit removed any incentive for a buyer to step in.
On June 29, Rite Aid announced it lost , for the quarter ending in June, on revenue of $5.6 billion. Management projected a net loss for the year of $650-$680 million on revenue of $22.6-$23 billion. Operating cash flow for the quarter was negative $372 million, and there was $135 million of cash on the books.
The release brought in the shorts, who saw . Now it has brought in small traders anxious to by denying them stock needed to close out their positions.
RAD Stock: What Happens Next?
Any short squeeze will be short-term. By any reasonable measure, Rite Aid looks doomed. As with Yellow (NASDAQ:YELL) and Tupperware (NYSE:TUP), this looks like a supernova, the explosion of a star before it disappears from the sky.
As of this writing, Dana Blankenhorn held a LONG position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
