Why Danimer Scientific Gained 13% in June

What happened

Shares of Danimer Scientific (NYSE:DNMR) were climbing 13% last month, according to data provided by S&P Global Market Intelligence, on what appeared to be a short squeeze. The maker of bioplastics jumped early in the month, surging on the same day shares of AMC Entertainment Holdings skyrocketed. The company was also attacked by a short-seller at the end of May, which helped it attract attention from the Reddit crowd, which focuses on stocks with the potential for short squeezes.

As you can see from the chart below, the stock soared in the first week of June before cooling off later in the month.

DNMR Chart

DNMR data by YCharts

So what

Danimer stock jumped 12% on June 2 on high volume, even though there was no news on the stock. Instead, a number of popular meme stocks jumped as investors tried to execute short squeezes on stocks like AMC Entertainment and Bed Bath & Beyond. Shares jumped again on June 7 as the company was added to the Russell 3000 index and as it attracted some attention on Reddit’s Wall Street bets board among traders who wanted to punish short-seller Spruce Point, which announced a short position in the stock in May.

In its most recent update on May 21, Spruce Point said Kentucky’s securities regulator had opened a formal inquiry into the company. Danimer responded to an earlier attack from Spruce Point, saying the report was inaccurate and deliberately misleading.

The rally at the beginning of the month cooled off, but shares climbed again after the company said it had fixed bottleneck issues in a plant in Kentucky.

Now what

Only 11% of Danimer’s shares were sold short as of mid-June, but being on the radar of WallStreetBets traders could only help the stock. 

Danimer seems to have a lot of potential as a maker of biodegradable plastics, but high expectations are baked into the stock, which trades at a price-to-sales ratio of more than 40. Given that price tag, investors may want to wait and see if a better opportunity comes up.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/07/06/why-danimer-scientific-gained-13-in-june/

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