- Warren Buffett buys a significant stake in furniture retailer RH.
- The stock is up big in after-hours trading and bulls are rejoicing.
- About 36% of RH shares are sold short and they are about to get toasted.
RH (NYSE:RH), formerly known as Restoration Hardware, is a company that has a history of battling short sellers.
In 2018, the furniture retailer was ranked as the tenth most shorted name on the New York Stock Exchange. At that point, 35% of the company’s outstanding shares were sold short. Early this year, Bloomberg reported that RH short sellers lost $67 million after the equity surged by 16%. A strong first quarter performance that exceeded Wall Street expectations ignited the rally.
On Friday, short sellers will likely dance to a familiar tune. Warren Buffett revealed on Thursday that Berkshire Hathaway bought 1.2 million shares of RH. The Financial Times reported that the investment totaled $206 million for a 6.5% stake in the furniture company.
With the legendary investor on-board, it is very likely that RH will skyrocket to a fresh all-time high – bad news to those who shorted the stock.
RH Up Big After Hours
The Warren Buffett impact is in full effect. As of press time, RH jumped by 7.93% in after-hours trading. It looks ready to explode throughout the day.
Short sellers must have felt a punch in the gut once they heard the news of Buffett’s entry. ShortSqueeze reveals that 5.8 million shares are currently sold short. That’s about 36% of RH’s 16.1 million float. Once the market opens, short sellers have little recourse but to cover.
Trader Hidden Pivots, one of the market participants who longed RH before the Buffett announcement, predicts that the stock will soon reach $200 per share.