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Zim Integrated Shipping (NYSE:ZIM) stock has been surging lately amid speculations of a short squeeze in progress. Indeed, the Israeli shipping company is up more than 35% in just the past five days despite mounting headwinds against the company. Some see this as evidence that recreational investors are attempting a short squeeze of the distressed cargo transportation business.
What do you need to know about Zim lately?
Well, Zim has seemingly continued to face hurdles this year. ZIM stock has slid in each of the last three months after reporting disappointing Q3 figures amid rising impairment losses and low freight rates. As a result, despite the recent jump in share price, ZIM stock is still down nearly 40% year-to-date.
Zim’s troubles have only grown amid tensions in the Red Sea. Indeed, Yemen’s Houthi militants fired missiles on numerous cargo vessels traveling through the Red Sea last week. This has forced freight companies to take alternative routes to their destinations, many of which take days or even weeks longer, incurring higher freight prices in the process.
It’s for this reason that many investors assume ZIM’s recent surge is the result of a short squeeze attempt on the stock.
Is ZIM Stock Undergoing a Short Squeeze?
As it stands, ZIM stock has a 24.65% short interest, per Fintel. This means that nearly a quarter of all publicly traded ZIM shares have been sold short. This is further evidence that traders may be attempting to squeeze short investors.
A short squeeze refers to a trading mechanism in which investors artificially inflate the price of a given stock to the point that owners of short shares are forced to sell off their positions to avoid potentially crippling losses. This further pushes the stock up, sometimes by enormous amounts.
In the past, companies like GameStop (NYSE:GME) have been the subject of short squeezes. As a result, their share prices soared. GME in particular jumped more than 1,000% at the peak of its short squeeze.
Whether this is what’s happening with ZIM is unclear currently. At the time of writing, ZIM is up about 7% on the day.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.