59% Stock-Price Rise at Pacesetter Amazes Owner
Steven Strauss couldn’t believe it--his company’s stock price jumped 59% on Wednesday and has more than doubled since Friday, when Pacesetter Business Properties reported a hefty third-quarter loss.
“It did what!” he exclaimed when informed of the unusual activity.
“That’s rather amazing. . . . It’s hard for me to believe it did that. I’ll have to check to see if it isn’t a mistake.”
It wasn’t.
The commercial and industrial developer’s stock, which is thinly traded on the Pacific Stock Exchange, closed at $6.38 a share Wednesday, up from $4 a share Tuesday and a 132% increase from Friday’s close of $2.75.
But just what was driving the stock upward is a mystery.
Pacesetter Business Properties on Friday said it lost $581,000 in the third quarter ended Sept. 30, contrasted with a year-earlier loss of $658,000.
The company said a weak real estate market caused the loss and said it expected the market to remain weak for months to come.
Since that report there have been no rumors circulating about the company, and the firm has announced no news of any import, Strauss said.
The company has about 1.6 million shares outstanding, with insiders owning about half of them, Strauss, the company’s president, said.
While only 2,900 shares were traded Wednesday, it represented an unusually huge volume for a single day’s trading for the company.
Mark Matheson, an analyst with Cruttenden & Co., a Newport Beach investment broker, said he doesn’t know why the stock’s price has soared recently, but he suggested that a likely cause might have been “a short squeeze.”
A short seller is someone who acquires a stock in anticipation of a decline in price, such as right after a disappointing earnings report.
In a short sale, an investor borrows shares from a brokerage and sells them in anticipation of repaying the “loan” by purchasing the same number of shares at a lower price in the future.
But if the price rises instead of drops, the investor loses the difference between the sales price of the borrowed shares and the purchase price of the shares acquired to repay the loan.
