Short squeeze on in Alpha HPA

Synthetic Sapphire is a super tough material used for iPhone screens. Picture: Hold Folder.

Short sellers sent shares in the $686m minerals processing company Alpha HPA soaring Thursday after they rushed to cover their positions from earlier bets on declines in the company’s value.

Shares on Thursday closed almost 9 per cent higher to 85c after the company announced it would raise $40m in a placement with AustralianSuper, Orica and other large stakeholders at 73c a share.

The raising price was a 6.4 per cent discount compared to the last closing price of 78c on Wednesday.

It matches QIC’s recent $30m funding commitment.

Typically, a share price falls after a raise is announced, but a so-called “short squeeze” can send them soaring.

Short sellers have shares on loan for a fee as part of an investment strategy where they plan to return them to the holder once they have bought them back at a lower price, pocketing the profit.

But a short squeeze happens when a stock rallies unexpectedly, prompting short sellers to buy stock to cover their positions and limit their losses.

Clearly, none of them saw the latest announcement coming, which the company said was a strong endorsement of its Alpha Sapphire project.

The latest raise now sees the Alpha Sapphire business fully funded for its first 50 crystal growing units and through to positive cash flows.

It comes after the company earlier this year entered into agreements with Ebner-Fametec to provide for staged entry by Alpha into the production and sale of synthetic sapphire glass using Ebner-Fametec sapphire growth technology and Alpha’s custom high purity alumina tablets as feedstock.

Synthetic sapphire — sometimes referred to as sapphire glass — is commonly used as a window material, because it is both highly transparent to wavelengths of light and extraordinarily scratch-resistant.