What happened
Shares of Lemonade (NYSE: LMND) jumped more than 25% this week, according to data provided by S&P Global Market Intelligence, as the mobile-centric insurance technology company enjoyed an apparent short squeeze.
So what
The bulk of Lemonade's pop this week came on Wednesday, when trading volume on the stock tripled despite no company-specific news to drive the move -- though a positive quarterly report from online used car dealer Carvana(NYSE: CVNA) (which skyrocketed more than 40% that day) may have helped fuel the pop. While Carvana is a significant partner and stakeholder in auto insurance company Root(NASDAQ: ROOT), Lemonade closed on its acquisition of Root competitor Metromile last summer. Any good news for the used car market could also be positive for one of Lemonade's key business lines.
Now what
In any case, with nearly 24% of Lemonade's float sold short as of this writing and the company set to report its own second-quarter results on Aug. 2, 2023, it won't take much in the way of additional positive catalysts for skittish short-sellers to flee for the exits and drive shares up in the process. Lemonade management has previously told investors the company's current cash position and growth trajectory should be more than adequate to reach sustained profitability without raising additional capital. If that holds true, Lemonade's recent gains could be just the start of a much longer-term trend.
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Steve Symington has positions in Lemonade. The Motley Fool has positions in and recommends Lemonade. The Motley Fool has a disclosure policy.
