I’m glad you’re enjoying the ride. Since I started this mess, I figured maybe I should weigh in even if I don’t know the industry well.
In my experience, when this situation occurs (price rising exponentially while shares short is growing for unknown-to-me reasons) the reason is one of two things:
First, obviously, is the chance that someone - someone with very deep pockets, or LOTS of someones with insider knowledge- know(s) something I don’t. For such a visible company in such a well-watched industry, setting the niche on fire by the numbers, I personally find this unlikely.
Second, the one that concerns me more, is the idea that the same numbers setting the niche on fire, are untrue. AAOI’s growth is hard to believe, and for such a new company, well … this gets back to my thoughts on investing in China. You can’t call them up and ask for a look at the books. And neither can U.S. regulators. (They can ask, but without authority, and it would be 99.9999% likely to be to no avail.)
So the biggest question in my mind is, “Did they cook the books?” It’s happened before, but regardless of what the shorts or the pundits proclaim, 1) I’ve seen no evidence for that argument, 2) I have to wonder why, when they are obviously profitable, they would feel compelled to do so, especially when 3) Every person on the management team has to know they would be finished in business of any type and 4) would be required to forfeit all gains in the scam.
But I wouldn’t listen to a poster of amateur investors on a discussion board to answer such a daunting question. I would, instead, decide how much the money in question means to me. For every $1k you invested, you’re sitting on almost $700 in gains. If you invested, say, $10k in AAOI, just for a number to discuss it with, the question becomes easier to answer.
I’ll assume you invested $10k just because it’s a nice, round number, and … ahem … I might have done just that on Monday and despite rumors to the contrary, I don’t consider myself crazy. There are innumerable possible outcomes financially, but in the realm of basics, only a few (meaning the numbers included, while meant to be totally feasible, are total WAG’s.)
Some possibilities by the end of 2017:
- Who cares? Sell now.
- The company keeps growing as indicated and expected through the end of the year as a minimum. Stock raises another 75%. (Important: See note at the end.)
- Similar to above, but shorts get crushed. Stock up another 150% minimum.
- The company has a terrible secret that gets outed 2 weeks from now, with the stock up another 10% when the news hits the fan. Hello, Mr. Maddoff, it’s nice to meet you.
- Technical glitches create shortage of finished inventory, company loses market share. Stock price drops 40%.
- The #!*_@ shorts were right, the freakin’ inside traders and traitors cash in while the stock goes to zero.
Now you may think these are all unreasonable, but I’ve seen every one happen. So while the numbers may be (way) off, please realize that all the scenarios are absolutely possible as far as we know.
ario G / (L) Comment (Question)
1 7,000 Bingo! (Way to go!)
2 18,900 Woo Hoo! (How will this change your life?)
3 43,350 Cha Ching! (But did you sleep well this year?)
4 11,000 Before you sell - Yikes! (How fast can you sell?)
5 200 Again? (How fast can you sell?)
6 (10,000)Crap! (Why didn't you sell?)
A great investor could come up with a lot more scenarios, I realize. But as far as the results I think this covers all likely outcomes except for the possibility of a wild, unlimited upside and if that happens, we’ll both laugh at the annual nuthouse frat party.
Forget the story for a minute. Look at the numbers. Will any outcome change your life? Would any be absolutely unacceptable? Would your spouse kick your a$$ out if #6 got the call? I truly hope this helps a little, I know it can’t be much.
In spite of great places like this one to discuss investments, the truth is that Done well, Investing is a lonely game.
----------> Note: AAOI just raised guidance–again. Analysts can’t keep up. <-----------------