Wednesday, May 29, 2024
Dividend Stocks

Is a Short Squeeze Brewing in Ehang (EH) Stock?

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Ehang Holdings (NASDAQ:EH), a Chinese company developing an autonomous vertical take-off and landing (VTOL) vehicle, jumped 35% on news it is approaching certification in China.

Shares of EH stock were near $10 in pre-market trading. They kept rising when the market opened, to over $10.75. And, they have more than doubled in the last month. The company’s market capitalization, however, remains below $580 million.

VTOLs can take off like a helicopter but fly like an airplane. Three U.S. airlines have invested in the field, seeing them as air taxis to get people to and from hub airports.

The Ehang of It All

Ehang has been around since 2014 and came public in 2019 at $12.50 per share. Its most recent quarterly report showed an operating loss of $10.4 million and revenue of $1.2 million. It appointed its first independent director, serial entrepreneur Nick Yang, this month.

Ehang CEO Hu Huazhi, in a conference call last week, said his vehicles have completed 30,000 safe flights and that the company is moving ahead with plans to build its Urban Air Mobility platform. It has also deployed its EH216 electric VTOL for use in Spanish tests of how an air taxi service would work.

But the stock may be rising on a simple short squeeze. Fintel reports 19.8% of shares were recently being held short, mostly off listed exchanges.

Short-sale researchers at Wolfpack Research called Ehang a “stock promotion destined to crash and burn” in February. The report, which initially sent the stock down 60%, called its relationship with a key customer “a sham,” a charge that management denied.

But investors on Stocktwits were confident they could squeeze the shorts on Dec. 13. Traders on r/WallStreetBets found unusually high trading volume in the stock recently but were unsure if it was bullish or bearish.

What Happens Next for EH Stock?

All VTOL companies are long-term plays that require government approval to go into business. All are still basically pre-revenue. When that changes, they all become active speculations.

Ehang wants investors to believe that day is coming soon.

On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.


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