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Greenwich LifeSciences short squeeze interest: Growing positions vulnerable to GLSI stock price rise

By Alejandro Arrieche

Edited by Georgy Istigechev

14:41, 5 October 2022

People talk near Nasdaq Headquarters at Times Square
Greenwich LifeSciences went public on the Nasdaq Stock Exchange in 2020 – Photo: Leonardo Munoz / VIEWpress / Getty Images

The most recent Greenwich LifeSciences (GLSI) news was positive. The company is starting Phase 3 trials for its breast cancer immunotherapy drug GLSI-100, a development that puts it a step closer to being able to commercialise the treatment.

Market participants were apparently unsurprised by this positive news as the stock price has barely moved since 11 August, back when the announcement was made.

Meanwhile, GLSI short interest has been rising in the past 30 days or so, and that increases the risk of a short squeeze occurring in the future if Greenwich LifeSciences successfully hits the endpoints of this late-stage clinical trial.

GLSI live stock price chart


Is a short squeeze an actual possibility for GLSI stock?

In this article, we analyse some relevant metrics that could help you assess the possibility of a short squeeze.

What is a short squeeze?

A short squeeze is a market event triggered by an unexpected surge in the price of a heavily shorted security such as a stock

Short sellers effectively bet on the price of a stock to fall. They borrow stock, usually from a brokerage, and sell it with the expectation that its price will decline in the future.


They then sell the stock and wait for the price to drop, buying it back when the price sufficiently declines. 

The difference between the price of the sale and the price of the buyback is the short seller’s profit.

If the price starts to rise instead of falling, the investor can experience significant losses.

If a sharp price increase occurs, short sellers are forced to rapidly cover their open positions by buying back the asset. Market participants notice this increase in demand for the security and respond by pushing the asking price higher.

Short squeezes tend to be brief, but the consequences for those who held a short position in the security may be devastating as losses can be unlimited.

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What is Greenwich LifeSciences?

Greenwich LifeSciences is a biopharmaceutical company that is developing a treatment to prevent the reappearance of breast cancer in patients who have already undergone surgery.

Founded in 2006, the company rebranded as Greenwich in 2018 as it began work on the development of its immunotherapy treatment. In 2020, the company went public, listing its shares on the Nasdaq Capital Market under the ticker symbol GLSI.

During the first six months of 2022, Greenwich lost $1.35m. It’s a pre-revenue company whose product(s) have not yet been authorised for commerce by the United States Food and Drug Administration (FDA).

The GLSI-100 immunotherapy treatment has entered Phase 3 trials and begun transitioning to pre-commercialisation, meaning that the company is preparing to mass produce the treatment for launch primarily in the United States and Europe.

The Phase 3 trials are led by Baylor University and a ​"consortium of prominent cancer centers". A phase 2b trial led by the MD Anderson Cancer Center produced solid data, according to a GLSI presentation, with “0% recurrences over median 5 years follow-up, if fully immunized, versus 11% placebo recurrence rate in 96 patients, peak immunity after 6 months, minimal to no side effects.”

The CEO of Greenwich LifeSciences is Snehal S. Patel, a former investment banker and biochemical engineer with extensive experience in the healthcare and biotech industries.
 

Greenwich lifesciences(glsi) stock performance vs. us stock indices

Since going public, Greenwich’s shares have risen by 100%.

RDDT

49.39 Price
-13.870% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 0.34

WEEDca

11.66 Price
-10.320% 1D Chg, %
Long position overnight fee -0.0255%
Short position overnight fee 0.0036%
Overnight fee time 21:00 (UTC)
Spread 0.10

TSLA

175.31 Price
-2.440% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 0.26

NVDA

901.54 Price
+0.030% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 21:00 (UTC)
Spread 0.29

During that same period, the S&P 500 Index (US500) and the tech-heavy Nasdaq 100 Index (US100) produced gains of 13.2% and 2.6%, respectively. 

Greenwich LifeSciences short squeeze interest

The Greenwich LifeSciences short squeeze interest was on a downtrend until mid-August. However, the company’s announcement that it was commencing Phase III trials prompted short sellers to increase their bets that the stock will experience a decline in the future.

According to data compiled by MarketBeat, 194,500 shares of Greenwich LifeSciences were being shorted by 15 August, corresponding to 15.1% of the stock’s free float.

Since then and until mid-September, the number of shares borrowed by traders has increased to 257,100, resulting in an 810 basis points increase in the Greenwich LifeSciences short squeeze interest, which stood at 23.2% of the stock’s free float by 15 September.

The higher a stock’s short interest, the greater the possibility that it might be the subject of a short squeeze if the price unexpectedly rises.

For Greenwich, one catalyst that could propel the price of the stock is the success of the Phase III trial for GLSI-100.

A possible date for when this late-stage trial may be completed was not offered by the company, but the FDA website indicates that it typically takes companies around one to four years to complete these studies.

Can Greenwich LifeSciences stock experience a short squeeze soon?

Based on the number of years that it may take Greenwich to complete the Phase III trial for its GLSI-100 treatment, the odds that such an event could materially affect the price of the shares in the near term are low.

Other GLSI stock news that could also influence the price include coordinated efforts from retail or institutional traders that can opt to accumulate a significant amount of short-dated call options. This could trigger a market event called a “gamma squeeze” as brokers may be forced to acquire the stock to hedge their exposure to these derivatives.

The latest increase in Greenwich LifeSciences short interest may indicate that market participants believe that the company’s Phase III trial will not meet its primary endpoint.

If this occurs, the price of the stock could suffer a dramatic drop as the odds that the company will start generating revenues in the future could be reduced significantly.

Finally, according to data from MarketBeat, it will only take a day for short sellers to fully cover their open positions based on the stock’s average trading volumes. The current ratio of one day lowers the odds that a short squeeze can happen.

What are analysts predicting for the Greenwich LifeSciences stock price?

Only one analyst appears to be covering Greenwich LifeSciences stock, as of 5 October 2022, based on data from MarketBeat. H.C. Wainwright analyst Yi Chen reiterated his buy rating for the firm in July 2021 and set a 12-month price target of $78 a share. 

An estimate from Aegis was provided in January 2021, when the firm initiated coverage with a ‘buy’ rating and a price target of $75. 

These ratings may not be all that relevant as more than 12 months have passed since the two companies last updated their views on Greenwich. 

Meanwhile, estimates from Wallet Investor, a third-party algorithmic forecasting service, indicate that the price of GLSI stock will decline to $0 by February 2023.

None of these estimates should be considered a recommendation to buy or sell GLSI stock.

Investors are encouraged to perform their own adequate due diligence on a company before making an investment decision.

Remember that past performance does not guarantee future returns. And never trade money you cannot afford to lose. 

FAQs

What is Greenwich LifeSciences' current short interest?

As of 15 September 2022, 257,100 shares in Greenwich LifeSciences are being shorted, resulting in a 23.2% short interest based on the stock’s current free float. The dollar value of these positions stood at $2.66m, based on the price of the stock at that time, according to data compiled by MarketBeat.

How does a short squeeze work against Greenwich LifeSciences?

Since roughly a quarter of the free float of GLSI stock is being shorted, if the price increases dramatically, short sellers will be forced to buy the stock to close their positions so they can limit their losses. This increase in the demand for GLSI will prompt market participants to increase their asking price and, the higher the demand for GLSI shares is, the higher the price may go.

Will GLSI stock go up?

According to the price targets provided by the two analysts who have analysed the stock, the value of GLSI is expected to rise to over $70 a share. Estimates from Wallet Investor indicate that the stock may drop to zero by the end of 2023.

Remember that analysts and algorithm-based forecast websites can and do get their predictions wrong. Always do your own research. And never invest more than you can afford to lose.

Markets in this article

GLSI
Greenwich LifeSciences, Inc.
19.97 USD
-0.27 -1.350%
US500
US 500
5247.8 USD
-3.1 -0.060%
US100
US Tech 100
18249.4 USD
-36.9 -0.200%

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You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
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