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38 million of the 118 million shares outstanding are sold short as of Dec 14th. That's a staggering 32% of GT Advanced Technologies, Inc's shares. Note that the share price of this company is already down to about $3.24 creating a price to book ratio of just 0.9. Here's what I'm wondering: Have the short sellers been waiting until January to close their positions (buy to cover) so that they can avoid paying 2012 taxes on the gains? Should we be buying GTAT shares before these massive positions get closed in January and February?

Before we decide, let's consider for a moment that the short sellers truly believe that GTAT will lose even more of their value over the next few months. Is this likely? Well, to answer this we've got to look at how it could happen. It's not going to happen via surprising write-offs of goodwill. Only 10% of their assets are goodwill. Ok, how about in cancelled orders? GTAT is already figuring that 25% of their backlog will be lost due to canceled orders. Is 25% too optimistic? I must admit that I think this percentage is probably a bit optimistic, but not much. If 30% or 35% of that backlog were lost it's not enough to justify a lower stock price for GTAT. My broader thought here is that solar companies in an extremely competitive environment have little choice but to upgrade their production equipment. If they don't they won't stay competitive, and HiCZ systems (continuously-fed Czochralski systems) appear to be the next game-changer.

Finally, let's consider the other half of GTAT's business which is sapphire/LED. While solar could conceivably fall a tad bit more, although I don't think that it will, the LED industry is just starting to take off. 13% of all electricity consumed is used in lighting, much of it in commercial fluorescents, and LED offers huge advantages over fluorescents. Most importantly, LED's advantages are the kind that keep cash in consumers' pockets. Not only does the typical LED light last 8 times longer but it consumes far less power and we're talking about a 297 billion kWh /year market.

Oh, and before I sign off I should mention one more thing. I believe the January surge in financial markets now that many fiscal cliff issues are getting resolved could drive a squeeze. This driver alone could generate a significant squeeze on GTAT's short sellers.

Stats on LED vs. fluorescent lighting:

Electricity consumption statistics and figures:

GTAT's 38 million shares sold short, book value, goodwill position:

Disclosure: I am long GTAT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: 32% Are Short Selling GTAT