Jesse Felder, a Bend investment adviser and founder of Felder & Co., said the stock’s meteoric rise was likely the combination of an Internet rumor about the company that fueled speculators as well as traders covering their short positions as the stock’s price rose.
“The stock is trading on rumors now,” Felder said. “If the short-sellers catch any rumor, they are all going to scramble to buy back their stock, and that’s why you see big spikes like that.
“Some people also will speculate,” Felder said. “They see the company’s massive short position and put out a rumor the company is going to be bought out or receive capital and the (short traders) get scared. All kinds of games are being played in these thinly-traded stocks.”
Aside from the games traders are playing with the stock price, I am eager to see the company's official 10-Q. It should be released within a week or two. As I've written before, the company's commercial real estate portfolio has held up surprisingly well as the residential side has been just devastated. I am interested to see whether this relative strength can be maintained.
Cascade's capital ratios are dwindling with every quarter of continued losses. A few more quarters like this one and the bank will be insolvent so the company NEEDS the commercial portfolio to hang in there over the next few quarters. If it starts to deteriorate, I believe that potential investors will be loathe to give the bank the capital it needs to survive. It would also have important implications for the local economy. The bottom line for Cascade Bancorp is they either get a capital infusion (and soon) and the company survives or they don't get it and FDIC steps in to clean up the mess. Only time will tell and it looks as if time is getting short.