NEW YORK Shares of USEC Inc USU.N, a uranium company that closed out last week with a market value of just $30 million, more than doubled on Monday in action that traders said was due to a combination of thin liquidity and short-covering.
The stock soared as high as $15.77, up more than 160 percent, its highest level since late January, before paring gains. It closed up 98 percent to $11.98, the highest close since March 12.
USEC, a supplier of enriched uranium for commercial nuclear power plants, said in a statement that it had been contacted by the New York Stock Exchange about the "unusual market activity" in its shares, but said its policy is not to comment.
Monday marked a seventh straight session of gains for Bethesda, Maryland-based USEC, for a total gain of 288 percent.
While there was no specific news about the company, some analysts cited the weekend elections in Japan, where a pro-nuclear party posted a strong showing. Shares of Uranium Resources Inc (URRE.O), another energy company in the nuclear space, rose 17 percent on Monday.
The move in USEC's stock was likely amplified by thin liquidity in a stock that over the last 50 days has averaged about 113,000 shares a day. About 3.9 million shares exchanged hands on Monday, the biggest one-day trade in the stock's history.
"Liquidity is very thin in a company of this size, and the combination of that along with what appears to be a short squeeze is really moving the price," said Dennis Dick, proprietary trader at Bright Trading LLC in Las Vegas.
A short squeeze occurs when a stock gains rapidly, causing traders who had been betting on the stock to fall to cover bets in order to prevent further losses. About 15 percent of USEC's outstanding shares are currently being shorted, according to data from Markit.
The bid/ask spread on the stock was large, moving as wide as 80 cents at one point. Very liquid stocks, such as Bank of America Inc, often have a difference between the bid price and the ask price of a penny.
The spread "means that if someone wants to make a trade in the thousands or tens of thousands of shares, that will really move the price," Dick said.
Shares of USEC on Friday rose 29 percent, a move that the company also declined to comment on. Friday's session prompted the company to issue a similar statement declining to comment on unusual trading.
The stock had been under pressure since announcing a 1-for-25 reverse share split on June 27 in order to remain listed on the New York Stock Exchange. That split cut the company's outstanding common shares to about 5 million from about 124 million.
(Editing by Leslie Adler)