A Summer Short Squeeze Coming for 3D Printing Stocks?

June 23, 2014 • Analysis • Tags: , , ,

What goes up must come down. That’s the line that has shaped 3D printing names so far in 2014. After a remarkable 2013, the hype did not translate into the following year. However, with summer weather approaching, the hot air may be blowing back into 3D printing names.

Price action of 3d prinitng names

 

As seen above, the tide of red seems to have turned with the start of June. If this trend in investor sentiment continues, 3D printing names could have a sizzling 2014 summer. After 2013, short interest in the 3D printing companies above has risen significantly as fundamentals were outpaced.

3d printing short interest

 

As seen above, the short interest of Stratasys, 3D Systems and Organovo has risen sharply in 2014 meaning a rally similar to the one seen so far in June could cause short sellers to jump ship. Overstated moves will be common due to the high number of short shares and volatile history of the 3D printing stocks. Voxeljet is in a different situation as the company IPO at the peak of the 3D printing hype. With current price nearly half of IPO, shorts are covering positions.

Organovo’s Example of Exaggerated Move

Organovo released its FY results on June 12th, which caused the company to drop over 10%. The filing did not contain any new information that influenced the drop. However, misinformed investors panicked because year over year comparisons were not included. This was interpreted as management choosing not to include FY 2013 and as a result, undermined credibility.

Accounting standards don’t allow a company to exclude information because they feel like it. Fortunately for us investors, the SEC and auditors don’t function that way.

To accelerate uplisting from OTC to the NYSE MKT (July 11th 2013), Organovo changed its fiscal year from December 31 to March 31. This transition had to be recorded in the 2013 10K, which is why YoY comparisons were not included. Thus, Organovo followed reporting standards when YoY comparisons were not included. The company also included this description in the same annual filing:

“On March 31, 2013, our board of directors approved a change in our fiscal year end from December 31st to March 31st. As a result of this change, we filed a Transition Report on Form 10-K/T for the three-month transition period ended March 31, 2013. References to any of our pre-2013 fiscal years mean the fiscal years ending on December 31st.”

Shorts on Verge of Summertime Sadness ?

Since, ONVO has recovered the drop from the misunderstood annual filing. This is an example of how 3D printing names will experiences volatile shifts in price on any given news, be it of substance or not. Therefore, short sellers of 3D printing names like 3D Systems, Stratasys and Organovo could be one news release away from losing all 2014 gains. If June price action is an indication, 3D printing could be making a return.

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