Disappointing IPO Weber Inc. (WEBR) , which debuted last August at $14 a share, closed at $19.55 two days later and now trades in the mid-$8 range, had an interesting day on Tuesday. Its shares rose more than 16% on six times normal average volume. Interestingly, this was a full trading day after Weber released third-quarter results prior to Monday's market open.
It did not appear to be a great quarter. Revenue of $528 million was down 22% year over year and the company lost $7.5 million. However, investors sent shares 21% higher intraday on Monday following the earnings report, reportedly due to a cost-cutting plan announced by Weber. Those measures include the suspension of Weber's four-cent quarterly dividend, capital spending reductions, expense reductions and tighter inventory controls. On the earnings call, management suggested these actions will result in at least a $110 million "year-over-year cash benefit." Weber shares did not hold on to all of Monday's early optimism, however, and closed up 5% on the day.
Tuesday was a different story. Weber shares were up as much as 22% before closing at $8.47, up 16%. I don't believe this was a delayed reaction to the cost-cutting news, but rather something simpler. Short interest in Weber remains very high at more than 55%, so you've got to wonder whether some shorts were being covered.
We saw something similar back in late June. On June 23, Weber rose 16% on 17 times normal average volume. Shares closed that day at just over $10 after trading as high as $12 intraday. However, a true short squeeze never emerged, and days later, Weber shares had fallen below $8
I don't know if Tuesday's action is the start of a short squeeze, but part of my position is in a securities lending program and has been loaned out and returned seven times since December. Most recently, it was loaned out on Monday, with an interest rate of 18.5%. That's not the highest rate I've seen; the rate has been as high as 23% and as low as 11.5%.
No matter how you slice, Weber has been a huge disappointment so far as a publicly traded company. You can't argue with its stature as a solid brand name, but it has yet to deliver to shareholders since going public. Time will tell if the cost-cutting measures are successful. In the meantime, the shorts' influence on the stock price could be interesting to watch.
You also can't dismiss the possibility that at some point the company ends up being acquired by a bigger fish looking to build out its brand portfolio.