Liberty Media Corp (NASDAQ:LMCA), which now has a majority stake in Sirius XM, either owns or has minority interests in a number of other media companies. It recently spun off Starz (NASDAQ:STRZA), a premium movie service with more than 55 million subscribers. Investors may fear heavy selling if Liberty Media were to spin off shares of Sirius to its shareholders. However, with a $2 billion stock repurchase program in place, Sirius XM would be able to buy back 10% of its outstanding shares, significantly increasing the ownership stake of current investors. A program of that size also provides downside protection for the company’s share price by increasing demand for the stock. With a majority stakeholder, high short interest, and a large repurchase program in place, this stock may be ripe for a POP!
A squeeze play in mobile ads
The last short squeeze story you should watch involves the mobile advertising company Millennial Media, Inc. (NYSE:MM). The company’s platform provides more than 30,000 mobile apps with advertising optimization, and decides in real-time which advertisement to display. With more than 300 million users worldwide, the company has seen its revenue grow from $6 million in 2008, to $177.7 million in 2012.
Millenial’s story may be an instance where the short sellers are right. After it forecast 2013 revenues below analysts’ expectations, the company’s shares fell as much as 33%. On the other hand, 71% year-over-year revenue growth is nothing to sneeze at. With nearly 10% of its outstanding shares currently short, this may turn out to be an interesting story.
Again, you should not invest in a company simply because you believe it may experience a short squeeze. In some instances, the shorts end up being on the right side, as we are seeing with Millenial Media. In the case of Netflix, I did not believe the company was doomed, and I felt its share price did not properly reflect the company’s growth potential. The subsequent short squeeze was icing on the cake.
Short squeezes are beneficial stories to follow, because I believe there is something to be learned from the events leading up to the squeeze. As the saying goes, history doesn’t repeat itself — but it does rhyme. Recognizing the events that cause a stock to either rocket or plummet may help your portfolio one day.
The article Short Squeeze? Yes, Please! originally appeared on Fool.com and is written by Kyle Campbell.
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