What’s The Deal With Camber Energy?
Do you like fireworks, Great Ones? Well, have I got a stock for you: Camber Energy (NYSE: CEI).
Camber Energy is a little-known, independent oil and natural gas company based out of … where else but Houston, Texas. It’s a pretty typical oil company, with about 133,442 million barrels of oil equivalent and 207,823 million cubic feet of natural gas reserves.
Not too shabby, but not really enough to play with the big boys of the oil industry.
Honestly, Camber Energy is one of the least remarkable oil companies I’ve run across lately. There’s no disruption play. No alternative energy movement. Nothing but a small-time oil and gas company.
So, why are we talking about Camber Energy?
Because CEI stock exploded more than 1,200% between August 21 and September 30. Then, CEI stock imploded by 81% in less than a week before surging 95% again on Thursday.
What in the name of Texas Tea is going on here?
Well, with this being the age of meme stocks and
“sticking it to short sellers,” I think you might already have an idea.
Camber Energy is your latest “meme stock.” Say “hi,” everyone!
Camber: Saved By The Bell?
So, how did CEI stock — which hadn’t traded above $1 since March — blast off like a Walt Disney World fireworks display?
It all starts with Twitter user MrZackMorris, a self-described “Master FURU” — that’s “fake guru” for those who are wondering. Morris has about 560,000 Twitter followers and, back in late August, he took aim at Camber Energy, citing massive short interest.
For newbies out there, short interest measures the amount of a company’s stock that has been borrowed and sold short.
Short selling is when someone borrows your shares of a stock, sells them and then waits to buy them back at a much lower price. The short seller then returns those borrowed shares and keeps the difference.
As you might remember from prior meme stocks like AMC Entertainment and GameStop, short interest is the crucial driver for most of these kinds of trades. Meme stock traders scour Wall Street for heavily shorted stocks and then buy the holy heck out of them in a bid to force short sellers to buy back their positions to limit losses.
Remember, those short sellers have to eventually return those borrowed shares to their rightful owners. And a short squeeze is where those short sellers rush to buy back their borrowed stock to avoid heavy losses.
Get Shorty
As you can see with CEI, a short squeeze situation can have a ridiculous effect on squeezed stocks.
So, just how many CEI shares were sold short to make this 1,200% rally possible?
Officially, not that much, if we’re being honest. According to short selling data, as of September 15, only about 24% of Camber’s float — or shares available for public trading — was sold short.
Sure, that’s a rather large number of shorted shares … but it’s nothing extreme, by my experience.
I mean, Workhorse Group (Nasdaq: WKHS) currently has more than 38% of its float sold short, and WKHS stock isn’t ping-ponging off Wall Street’s walls like a five-year-old on a Red Bull high.
Why is CEI stock gyrating like someone plugged its pacemaker directly into a wall socket? Because officially reported short interest doesn’t appear to match up with how much of CEI’s stock is supposedly shorted.
According to Matthew Tuttle, CEO of Tuttle Capital Management, 91% of Camber Energy’s float is actually sold short. Tuttle says he uses proprietary data to see this “real” level of short interest. MrZackMorris apparently came to the same conclusion a little over a month ago when he started his short-squeeze crusade against CEI’s short sellers.
Now, if you really want to make meme stock traders go all out on a stock, just show them a stat like this. CEI stock officially has just 24% of its float sold short, but unofficial numbers point to a 91% short-to-float ratio.
Meme stock traders just love to stick it to short sellers who don’t appear to play fair — it’s kinda their thing.
Camber’s Short Circuit
The question you’re all probably asking yourselves right now is: Should I trade CEI stock? Should I try to capitalize on this new meme stock?
Personally? Every fiber of my being screams: “No!”
After all, this isn’t investing. It’s barely trading. Buying CEI stock to ride a potential short squeeze play is nothing short of gambling — and you’d probably have better odds of making money by playing craps or blackjack in Vegas.
But what about oil?! Demand is rising again, and oil isn’t going away. Wouldn’t this cheap stock be a good play on an oil rebound?
I hear you, and I was curious about that … so I took a deeper look. And what I found was troubling. Camber Energy is an oil company with potential prospects, but it doesn’t have the clout or scale of the big boys in the energy sector. Furthermore, I highly question Camber’s management.
Why? Because Camber Energy hasn’t filed financial statements in more than a year!
Those are all the red flags I need. I mean, how are you going to take advantage of rising oil prices and increased demand if you can’t even get your own financials in order?
But there’s still that nagging FOMO on a dollar stock that could shoot to the moon if meme traders get their way. What’s more, I could spend more on a single coffee or a candy bar than I would on one share of CEI stock right now.
Soooo tempting…
In the end, Great Ones, I’m leaving this one alone. I suggest you do as well … unless you have a mainline of Mylanta or Pepto hooked up to deal with all the stomach-churning moves that CEI stock will make in the coming months.
If you do decide to take a chance and gamble on Camber Energy … remember to use limit orders and stop losses. Set your target gain before you trade CEI stock, stick to it and get out when you hit it.
The biggest bottom line when trading meme stocks — should you choose to take that risk — is that you absolutely do not want to be the last man holding the bag when everything finally hits the fan.
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Joseph Hargett
Editor, Great Stuff