This Short Squeeze Candidate Could Actually Pan Out in the Long Run

The "short squeeze" became a mainstream phenomenon when meme stocks like Gamestop and AMC saw their stock prices multiply by 10 times to 100 times in a matter of days. The frenzy minted "meme stock millionaires" and has sent retail investors looking for other heavily shorted stocks, hoping to catch the same lightning in a bottle again.

But what causes a short squeeze? Let's talk about why Altimeter Growth (NASDAQ: AGC) is a potential short-squeeze candidate and why it deserves to be considered more than a "get rich quick" stock.

When investors "short" a stock, they borrow a share from their broker in order to sell it. The short seller "owes" that share of stock back to the broker at a later date, just like owing someone a cash-based debt. A short seller makes money by repurchasing the share at a lower price than it was shorted at, keeping the price difference. So if I short a stock at $10 and buy a share to repay my debt to the broker (called "covering") at $8, I profit from the $2 difference in share price. This way, bearish investors can make direct investments in the idea that a certain stock's price is going down instead of up.

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Source Fool.com