11/22/2012 01:10 EST | Updated 01/22/2013 05:12 EST

RIM shares spike on analyst optimism

Shares in Research in Motion surged more than 17 per cent Thursday after a National Bank analyst boosted his price target for the stock.

Shares in RIM, the most active stock on the Toronto Stock Exchange on Thursday, jumped by as much as $1.86 to $12.09 before edging back to close at $12.00, a gain of $1.77, or 17.3 per cent, on volume of 12.6 million, more than four times the usual.

The shares have gained 45 per cent this month.

The price move also came amid high short interest in the stock, which adds to volatility.

Analyst Kris Thompson raised his predicted price for the shares from $12 to $15.

Thompson argues that investors who buy the shares now will make money as the stock rises ahead of the launch of the new BlackBerry10 phones early next year.

Short sellers hold a high percentage of the company’s shares. Short interest totals about 95 million shares, or more than 18 per cent of the total.

Short squeeze possible

Short sellers bet on a drop in the market value of a firm by borrowing its shares, selling them and hoping to profit by repaying the loan in future with shares that have fallen in future.

A high short interest increases the odds of a short squeeze. That happens when the shares rise, and short sellers rush in to buy to avoid losing more money on their bets, which pushes the price even higher.

A high short interest leads other investors to buy the shares, pushing the price up, in anticipation of profiting from a short squeeze.

The price move came despite the recent move by the U.S. National Transportation Safety Board to drop the use of BlackBerry smartphones by its staff in favour of the new iPhone 5 because of what it termed "performance issues."

The NTSB said it needs reliable devices for its employees to investigate accidents, often in remote locations.

Waterloo, Ont.-based RIM is hoping the launch of its BB10 smartphones will help it regain some of the market share it has lost in recent years to Apple Inc.’s iPhone and devices that run on Google Inc.’s Android operating system.