Getty Images (NYSE:GETY) the stock soared last night, up 200% from its meltdown price. Now the shares are up more than 100% this morning. It comes just five days after the image licensor went public via a Special Purpose Acquisition Company (SPAC) merger.
Getty returned to the public market on July 25 after completing a merger with blank check company CC Neuberger Principal Holdings, which had traded as PRPB stock. Shares of PRPB fell 13% the day after the merger was announced. The first day of trading was also quiet; shares fell another 2%.
Today’s jump from $10.50 to $27 overnight came after it emerged that the public float was just 500,000 shares after buybacks completed. According Barronsthe Getty family owns approximately 41% of GETY shares while Koch Industries owns approximately 19%.
Here’s what investors need to know to get ahead.
What’s going on with GETY shares?
This year, SPACs have become relatively unpopular. After a big boom in interest last year, many turned out to represent bad bets, with insiders cashing in.
Getty may be different, however, having used the $875 million of its merger proceeds to remove fixed liabilities from its balance sheet, “including approximately $700 million in preferred stock liabilities” from Koch.
This means that anyone who borrowed GETY shares earlier in the week to sell them later has fewer shares available for purchase than expected. For traders on Stocktwits, this means that there may be a big opportunity to press these shorts by buying GETY shares. The buybacks sent shares available for trading plummeting by 8 million shares, according to a trader on Stocktwits.
What happens after
So what happens next with Getty Images and its stock? The risk here is that GETY stock price is now well above its fundamentals. Last year, the company earned just 13 cents a share on revenue of $918 million.
At today’s opening price of $26.48 per share, the 500,000 shares available were worth more than $13 billion. Some of the squeeze traders suggested buying Getty warrants; they surpassed $1 overnight at one point.
However, what goes up during a short pressure decreases when the pressure is finished. If you want to play this one, watch the action very closely.
As of the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.