The Four Microcap Squeeze Plays - ALF, BCTX, GOED, GOVX

Our top picks MVIS and SPRT have gone on a run as predicted after the #AMCSqueeze sympathy play. Bitcoin has also recovered, leading to strong bullish moves on the miners. We are now going to focus on microcap short squeeze plays. Wallstreetbets censors DD on these stocks so we are going to do a write up here instead. 

AMC apes are fighting against the scummy moves of hedge fund shorters, attempting to create a major squeeze. While that can happen and is well deserved, there are no funds more scummy than funds that short small caps. What they do is they raise funds for a company and short the stock at the same time, maximizing profits for them at the expense of the company and its retail investors. If you want a major short squeeze, microcap stocks offer the best opportunity. We have identified four companies that particularly stand out:

Alfi, Inc. (ALF)

BriaCell Therapeutics Corp. (BCTX)

1847 Goedeker Inc. (GOED)

GeoVax Labs, Inc. (GOVX)

We could go on about the trading of these stocks, but its blatantly obvious what has gone on here if you look at the chart and price history over the last several months. Some days these stocks have only a few thousand in volume. Other days there are 10's of million in volume. On those days they go up on news on heavy volume, then get hammered down on relatively light volume to raid stop losses and kill momentum. Shorts, hedge funds and other algo traders are manipulating the stock prices at the expense of retail shareholders who want to support a good startup company. Sometimes it works as they can force the company to do a financing at a cheap price and then cover after momentum is lost. But all of these companies have just raised cash and are now in a good spot to release news or other positive updates. It's time to teach these shorts a lesson and win big at their expense. 

Q: Won't these stocks distract from other plays like AMC?

No, because they have such small sizes that they really won't impact the money flow into larger stocks. Stocks like AMC require hundreds of million or billions of dollars worth of buying in a day. These stocks would require only a few million dollars of daily buying to put pressure on the shorts. Here's a chart gathered from Yahoo Finance data to illustrate what we mean:

These four stocks combined add up to only about $500 million in market cap. GOED is the bulk of that. While the short interest as a percent of the float is around only 5% on these stocks, Yahoo's short interest data is as of May 28. As these stocks have had surges in volume in June, it's fair to assume that short interest is much higher. 

Warrants can be used to facilitate a squeeze and create leveraged upside just like buying call options

One thing that these stocks have in common is that they all have warrants. The symbols are ALFIW, BCTX, GOED.WS and GOVXW. Warrants function very similarly to call options in that they are the right to buy a stock at a set price and that funds use them to hedge so that they can short the stock. The differences between warrants and calls are that warrants have a limited supply and that they generally have much longer times to expiry. These ones all expire in 2025 or later. This makes them very good to hold. If you buy short term options and the stock price moves against you for a few weeks, you lost most of your money. On these warrants, even if the stock price does nothing for a few weeks, you still have lots more time. 

Since there are a limited supply of warrants, if the public were to buy up a fund's inventory, that fund would get nervous and start covering their short sales on the stock since they no longer have the warrants to hedge. That would put buying pressure on the stock. This is similar to the gamma squeeze theory by using call options. Some might say that the call option impact can be much greater, but keep in mind that those types of gamma squeezes are on stocks with much larger floats. These stocks have floats of less than 10 million shares. It won't take that much to cause a gamma squeeze.

The other obvious advantage of buying warrants are their leveraged upside. Of course, this applies to downside risk as well, but since there is so much time until expiry that's not such a huge concern in 2021.  This is a chart of the stock,  the warrant symbol, the strike price, the price of the stock if it were to double, the warrant value (defined as stock price less the strike price) and the percentage the warrant would gain if the stock was to double.

When the stock price doubles, the warrants triple in price or more. ALF's warrant offer the best upside because they actually sit below the intrinsic value right now. Why? Because the stock price ran so much at the close on Tuesday that the warrants didn't have time to catch up. Don't expect to get them so cheap tomorrow morning if the stock price opens above $7. Then again the buy price might not matter if the stock goes on a continued run, fueled by the squeezing of shorts.