Why iRobot Stock Is Surging Today

iRobot (NASDAQ: IRBT) stock is making big gains Monday. The company's share price was up 9.4% as of 2 p.m. ET today, according to data from S&P Global Market Intelligence .

iRobot stock has seen volatile swings this year and has frequently seen big valuation movement even in the absence of business-specific news.

Over the weekend, there was news that a new institutional investor had purchased stock in the producer of products like the Roomba robotic vacuum cleaner. Some additional investors are pouring money into the company's shares in response, and the uptick in bullish momentum might be triggering some extra short-squeeze buying.

iRobot stock gets a vote of confidence from a big buyer

In a recent filing with the Securities and Exchange Commission, Susquehanna Fundamental Investments showed that it had purchased 145,745 shares of iRobot stock in this year's first quarter. The purchase gave Susquehanna a roughly 0.5% ownership stake in the robotics specialist, and news of the investment appears to have kicked off some cascading bullish momentum for the stock.

A relatively high percentage of total iRobot stock is sold short, which reflects a belief among many investors that the stock will fall below current levels over time. When investors want to bet against a stock, they can borrow the stock from a broker and sell it, with the hopes of buying it back at a lower price later and collecting the difference in valuation as a profit. This practice is known as short-selling.

But when short-sellers want to close out their position in order to avoid taking losses, they still have to buy back the stock. In turn, this has the effect of creating upward pricing momentum for shares. As prices rise, more short-sellers are incentivized to close out their positions -- helping to send prices even higher. iRobot stock might be benefiting from this short-squeeze dynamic today.

What's next for iRobot?

Earlier this year, European regulators blocked Amazon's deal to acquire iRobot, putting the robotics specialist's future in doubt. The scuttling of the deal on antitrust grounds also tanked its stock, and its share price is now down 73% year to date.

IRBT data by YCharts.

In the first quarter, revenue fell 6% year over year to $160.3 million. The company did manage to reduce its adjusted loss per share by 8% to $1.53, but the company could find it difficult to continue cutting costs over the long term.

iRobot is facing powerful pressures due to commodification trends. Competition from Chinese companies and other rivals looks poised to continue eroding iRobot's market share and hurting its pricing power.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends iRobot. The Motley Fool has a disclosure policy .