Short squeezes have been one of the most talked-about and debated topics on Wall Street in recent years. In 2021, online stock traders on Reddit garnered attention by organizing focused purchasing campaigns aimed at triggering short squeezes in stocks with high short interest. This led to significant price spikes, causing some short sellers to incur losses. Since that time, short-squeeze stocks regularly generate massive interest in certain investment circles.

A short squeeze happens when a stock’s price rises sharply, compelling many short sellers to cover their positions by buying shares. As a result, this increased buying activity fuels further upward momentum in the stock price.

However, it’s important to note that investing in short-squeeze stocks, or those with high short interest, can be a high-risk, high-reward proposition. Short squeezes can lead to significant price spikes, but can also be short-lived, resulting in sharp price declines. As such, investors should conduct thorough research and consider their risk tolerance before investing in such short-squeeze stocks.

That said, investors interested in short squeezes may find the following three stocks appealing due to their high short interest.

Beyond Meat (BYND)

Plant-based meat company Beyond Meat (NASDAQ:BYND) was once the darling of the masses. Touted as the next big thing in planetary diets, the stock soared in 2020. However, things started sour in 2021 as investors began to tire of growth stocks.

In 2022, the difficulties persisted for Beyond Meat, resulting in the announcement of a plan to reduce its workforce by 19%. Additionally, the company reported a 20.6% decline in fourth-quarter revenue.

Furthermore, the Good Food Institute reports over 60 varieties of plant-based meat brands, sporting more than $500,000 in sales. This report suggests competition is fierce. Plus, Beyond Meat competes not just with alternative meats, but also with actual beef. Beef is cheaper and more familiar to customers. Furthermore, many customers believes its taste is superior.

Previously, Beyond Meat investors had high expectations for a rapidly expanding stock with a vast market opportunity. However, short sellers view the company as unprofitable, with negative growth, in a market that is becoming increasingly competitive. At last look, the short interest for the stock stood at 35.36%.

Nikola (NKLA)

Over the past two years, short sellers have fiercely contested electric vehicle stocks, with Nikola (NASDAQ: NKLA) being one of the most contentious EV stocks.

After short-seller Hindenburg Research accused Nikola of spreading “an ocean of lies” regarding its products, the company’s founder, Trevor Milton, resigned in September 2020. Later in October 2022, Milton was found guilty of three fraud charges.

Nikola recently announced a new stock offering to raise $100 million to produce its heavy electric trucks. The offering was priced at $1.12 per share, a significant drop from the previous day’s closing price of $1.40. As a result, Nikola’s claims saw a double-digit decline. The funds raised by the company are earmarked for scaling up manufacturing for its battery and hydrogen fuel cell electric Class 8 heavy trucks.

Nikola intends to deliver its hydrogen fuel cell trucks sometime in late-2023. However, the company may require additional funds to generate revenue from these vehicles.

Although shareholders typically disapprove of dilution, the present circumstances that have led to the announcement of new share sale plans might suggest that the company faces more significant financial difficulties than previously known.

Considering all these factors, the short interest in this particular stock has surged. Nikola stands out among short-squeeze stocks due to its short interest of 23.33%.

Electrameccanica (SOLO)

Electrameccanica (NASDAQ:SOLO), a Canadian EV stock, experienced a surge in share price from under $1 in early 2020 to a high of $4 in late-2021. However, as of writing, the stock has declined drastically and trades around 54 cents.

Electrameccanica has demonstrated impressive growth, with year-over-year revenue growth exceeding 1,200% and a 37% increase in vehicle deliveries sequentially in the third quarter.

Despite reporting significant growth, Electrameccanica’s net losses continue to increase, which short sellers have taken notice of. If the company reported an unexpected profit, it could trigger a significant short squeeze in the stock, which currently has a short interest of approximately 9.28% of its float.

Amid numerous electric vehicle start-ups, ElectraMeccanica Vehicles stands out with its unique flagship vehicle. The SOLO, named after the company’s stock ticker, features three wheels, accommodates only one passenger (the driver) and has no space for additional passengers.

Accordingly, SOLO stock is clearly a speculative investment. Analysts and investors do not know what the future will hold for these unconventional vehicles.

Big cars have always been popular among Americans. That is why SOLO faces substantial challenges ahead.

However, that’s not really what’s essential, in the context of investing in short-squeeze stocks. If there are a few positive announcements, or the company delivers a good earnings report, it will be enough to send the stock soaring.

On the publication date, Faizan Farooque did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.