It’s strange enough when a stock is up 74% in two days, but rarer still when that move is not accompanied by any news to explain it.
Such is the case for AIG , whose swift ascent yesterday (up over 8 points) and much of today (it was up over 17% at one point) is attributable to that most painful of investor predicaments: the short squeeze.
There are shares of the insurer available for borrow, though not many and at a steep cost that runs as high as a -75% rebate, meaning the borrower has to pay the lender 75% of the stock’s value per annum.
Given its limited float (134 million shares), the result of a 20 for 1 reverse split, it’s not all that hard to set AIG shares on a tear.
It’s unclear what has triggered the squeeze, but similar moves in CIT , FNM and FRE , all highly distressed financials, have many wondering whether a fund with a “short basket” was taking too much pain and rushed to cover, sparking a far greater squeeze.AIG reports results tomorrow.
It seems unlikely there will be any news in those results to justify the huge move in the shares.
When the squeeze ends, those able to withstand the pain may find the stock in retreat once again.
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