One investment case that Reddit traders have been making for the latest meme stock is that it is powered by cow flatulence. They’re not far off.
Clean Energy Fuels (ticker: CLNE), the stock some are targeting, collects and transports natural gas produced by animal waste collected at dairy farms, among other sources.
Clean Energy soared 37% on Wednesday morning as the meme trade gathered momentum, and boisterous Reddit posters celebrated: “Can you smell the cow poop and the Benjamins this morning?” asked one meme. It had already risen 22% over the prior week before Wednesday’s action. The company does not appear to have released any major news that would explain the stock move. As with other meme stocks, Clean Energy’s move appears to be driven by an attempted short squeeze.
Some of the Redditors did mention the positive implications of the company’s business model. Clean Energy Fuels, whose largest shareholder is French energy giant Total (TOT), sells renewable natural gas to trucks and vehicle fleets like airport shuttles, causing a reduction in overall carbon emissions. It also sells conventional natural gas. Among its partners are Amazon.com (AMZN).
Beyond the comedic potential of animal waste, however, message board chatter appears to be focused on the stock’s short interest. That has been the model for several investments that have recently become popular among retail traders. A high short interest raises the possibility of a short squeeze — where people betting against the stock are forced to buy back shares, which they had borrowed and sold, out of fear that the stock will keep rising and wipe them out.
Clean Energy Fuels doesn’t have the kind of sky-high short interest that GameStop (GME) had before that stock was squeezed in January. But it is attracting some naysayers, and the setup is starting to resemble some of the other short squeezes that have rocked the market in recent weeks.
Clean Energy is a $2.7 billion stock, and 11 million shares—or 8.35% of its float — has been shorted, according to Ihor Dusaniwsky, managing director at S3 Partners, which tracks short interest. Over the past week, short interest in the stock has climbed along with the share price, with short sellers obtaining 399,000 shares worth $4 million, Dusaniwsky wrote in an email to Barron’s.
Short sellers are down $21 million in the past week. Of course, it’s still not like some other meme stocks. More than 20% of AMC Entertainment (AMC) shares were shorted late last month as that trade took off, according to Dusaniwsky.
“Although the recent losses have made the stock more ‘squeezable’, shorts are not exiting their positions in size at the moment,” he added. “CLNE has a 55 out of 100 in our Squeeze Risk Score Metric, meaning that there is a strong potential for a squeeze, but the pressure to buy-to-cover has not become overwhelming yet.”
The average short interest for stocks in an exchange-traded fund tracking the small-cap Russell 2000 was 4.8% as of May 14, the latest data available
Clean Energy has been issuing more stock in recent weeks. It announced one “at-the money raise”–where it sells stock at market prices — on June 7 and another on May 10. In total, the company sold 22.8 million shares in those raises, expanding its share count by more than 10% above its base as of April 30. It raised $200 million through those sales, a significant boost given that it held $117 million in cash on its balance sheet at the end of the latest quarter.
It plans to use the money for “developing and acquiring renewable natural gas production projects, building fueling stations to support contracted RNG fueling volume, and general corporate purposes.”
In a securities filing on Wednesday, the company said it “has no plans to implement a new at-the-market equity offering program to raise additional capital.”
Clean Energy did not respond to a request for comment on the movements in its stock.
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