Many amateur investors think that when popular FinTwit influencers are endlessly promoting a stock on social media sites, the stock is bound to go up. However, the reality is actually oftentimes the opposite. We explain why in this section.

Successful stock pumping requires a certain mix of ingredients in the underlying market structure of the stock. First, it’s best if the stock is a crowded short. Often, retail investors look at short interest to ascertain a crowded short, but short interest doesn’t tell enough of the story. If a lot of people are short a stock, but they’re short in small positions, then they won’t be shaken out in when the stock goes up. In the case of Enovix, every short recognizes that the stock is being heavily pumped. Therefore, the short sellers have small sizes because they’re wary of the incessant pumping.

On the other side, the pumpers have amassed a large set of retail investors among the stock’s long holders. These holders don’t really know what they own, and they’re just blindly following the pumpers. The problem with this is that the pumpers aren’t super bright and their bullish arguments are dumb, and as bad news comes out, there is a large, diverse and fragmented base of disparate retail investors that will easily get concerned and sell. Essentially, Enovix is a much more crowded long than a crowded short.

That’s why the pumping won’t work that well with ENVX. Notice that despite the press releases, the constant tweets, and the other promotional activity, the stock doesn’t generate very bullish price action. Volume doesn’t spike a whole lot on pumps. Fades are constant. When bad news comes out, the declines are dramatic. Enovix is a crowded long with a very fundamentally stupid bull thesis that’s easy to disprove, as we think we have in our report.

Pumping works better when few fundamental believers are long a stock, short interest outstrips the supply of shares to short, and algos can attack a crowded short. When the crowdedness of its long holder base is much more significant than the crowdedness of its short holder base, the stock is likelier to trade weakly. Given the fact that Enovix, fundamentally, is clearly worthless, this is a terrible stock to own because you think stock pumping and short squeezes will make you money. If you don’t believe in the fundamental thesis and are looking for a trading vehicle to benefit from stock promotion, look elsewhere.