June 16 (Reuters) – U.S. electric-vehicle startups saw big weekly gains on Friday, with a steady rally in their shares over the past few sessions nearly doubling the value of companies such as Nikola ( NKLA.O ).
The surge in EV stocks has come without obvious news or catalysts for the companies, leading many analysts and traders to point to a possible contraction in the very short stock.
Lordstown Motors ( RIDE.O ), for example, has short interest of 16.5%, according to S3 Partners. Other big gainers such as Nicola and Workhorse Group ( WKHS.O ) have short interest of 21.7% and 23.9%, respectively.
Used-car retailer Carvana ( CVNA.N ), another heavily shorted stock, posted strong gains this week that boosted its value to nearly $1.38 billion.
“We see this every time the market heats up,” said Dennis Dick, a trader at Triple D Trading.
“Carvana may have started it, it’s up over 100% in two weeks. Smaller names with more narrow interests are now following suit.”
The gains added more than $400 million to the combined market value of EV startups and coincided with a record winning streak at market leader Tesla ( TSLA.O ), whose stock movement often affects other companies in the sector.
Retail investors also plowed into EV stocks, with JP Morgan’s retail flows tracker showing Nicola was the fifth most traded U.S. stock by such traders on Thursday.
A wide range of options are in the works as traders bet on Nicola and Lordstown taking big gains in recent days.
More than half a million options contracts changed hands on Nicola on Thursday, making the relatively small company the eighth most active single stock name on the options market, according to Trade Alert data.
The stock rally could help Nicola weather the risk of a delisting after it received a warning from Nasdaq in late May that its share price was below the $1 minimum level.
Nicola fell 15% on Friday to close at $1.19. Despite the decline, the stock remains above the lows for the third consecutive session.
If it trades above $1 for 10 consecutive days, the stock will regain compliance with Nasdaq’s rules.
Workhorse rose nearly 1% and Lordstown fell half a percent, while Carvana fell about 4%, ending a week that gained more than 30%.
Nikola’s shares have a 12-month forward price-to-sales ratio of 3.21, compared with Workhorse’s 1.38 and Tesla’s 7.23, according to Refinitiv data.
However, there are many challenges for EV startups.
Rising interest rates and high inflation have limited companies’ access to financing at a time when efforts to increase production are already thinning their cash reserves.
Aditya Soni and Akash Sriram report in Bangalore; Additional reporting by Saqib Iqbal Ahmed in New York and Samrita Arunachalam in Bangalore; Editing by Shaunak Dasgupta and Pooja Desai
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