Long Squeeze

We don’t know how the rumors got started, but someone out there is spreading lies about our company. They’re saying that our CEO, Janice, is about to be indicted for embezzling. We just can’t believe it—she’s such a nice person. Nice people don’t embezzle, right?

But regardless of how nice she is, we now have a big problem on our hands: those nasty rumors are causing our stock value to sink like it’s made of, well...whatever the Titanic was made of. And even worse, what started out as a stock price drop is quickly turning into a “long squeeze,” a situation where one sudden price drop begets a bunch of share-selling, which begets another price drop, which begets more selling. It’s like a stock price avalanche, and our organization is about to be buried.

Long squeezes don’t only happen as a result of rumors or shady CEO behavior, though. There are other organizational and market factors that might be involved. For example, companies whose products or services are no longer relevant—like a firm that produced rotary phones after about 1975—could see a long squeeze situation happening with their stock, as shareholders see the writing on the wall and invest their money elsewhere. Or if the stock market in general is underperforming, investors might decide to cut their losses and sell before things get even worse. If the situation is a prolonged one, it can leave organizations in many industries feeling the long squeeze.