Heavy Volume Drives Low-Float Stock Plus Therapeutics Up 200%

Plus Therapeutics Inc PSTV is the latest and one of the most extreme recent examples of the powerful combination of low float and heavy trading volume.

Plus shares traded higher by more than 215% on Friday. The biotech stock more than tripled after the company reported second-quarter earnings on Thursday afternoon and said it plans to initiate a Phase II study of DocePLUS in treating small cell lung cancer patients who have progressed following first-line chemotherapy. Plus reported a net loss from continuing operations of $2.3 million and said it ended the quarter with $4.5 million in cash.

DocePLUS is Plus’s leading pipeline drug candidate, and the company estimates its peak annual sales could ultimately reach $250 million. Plus has previously received orphan drug designation from the FDA for small cell lung cancer treatment.

What Happened

Since there didn’t seem to be anything exceptional in Plus’ earnings report, market dynamics likely played a large role in the volatile Friday trading.

Plus is one of a number of low float stocks that have experienced large short-term rallies on little or no major news in recent quarters. When shares start to rise, a flood of momentum traders coupled with a limited float can lead to parabolic spikes in share price.

While an earnings report is always a fundamental catalyst for any stock, such an extreme move in a stock is often a sign that a low float has created a short-term shortage of available shares for traders.

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Why It's Important

According to Yahoo Finance, Plus has just 226,830 shares held short for a short percent of float of about 1%. Those numbers suggest a short squeeze is likely not the culprit behind the large move.

The stock’s 22.1 million-share float is small, however, and a huge jump in trading volume following earnings explains the extreme volatility. On Friday, Plus’s trading volume was 10.71 million shares as of around 12:15 p.m. compared to its long-term average daily trading volume of just 13,560 shares.

If Friday’s big jump at the open was driven primarily by the company’s earnings fundamentals, traders can expect the stock to hold onto its gains as the market approaches the close. If the big gains were driven mostly by the stock’s small float, the stock may give up the vast majority of its gains in the days and weeks ahead.

The stock traded around $10.76 per share at time of publication, up 177%.