Knickerbocker Up 37% on Word of Stock Split : Market: Rancho Santa Margarita firm’s chairman says news may have lead short sellers to buy.

RANCHO SANTA MARGARITA â€”  Rapidly moving L.L. Knickerbocker stock jumped more than 37% Wednesday in heavy trading on the eve of a 5-for-1 stock split.

Traders said they were baffled by the latest price run-up, which came after a slump in which the company’s stock lost about half of its value over seven days of hectic trading. The stock on Wednesday spurted $8.875 a share to $32.50. A total of 390,500 shares were traded, or 39% of the estimated shares in public hands.

Chairman Louis Knickerbocker said the company’s statement Wednesday that it planned to go through with its previously announced stock split may have triggered a buying surge by short sellers--traders who had sold stock they did not own in hopes of buying the shares later at a cheaper price.

These traders may have decided to cover their positions before today’s split, which cuts the stock’s price 80% and makes it more affordable to investors, possibly driving prices higher.

“Everybody is saying that the shorts felt we wouldn’t do the 5-for-1 split and when we came out with the news [Wednesday], it ignited the market,� he said. Knickerbocker owns 1.45 million shares, or about 59% of the company’s estimated 2.45 million outstanding shares, but has said he did not plan to sell his stock.

The company first announced the stock split Aug. 11, saying it was taking the action to increase the number of shares available to investors. The split increases the number of outstanding shares to about 12.3 million.

The company, which uses celebrities to sell dolls and other products on cable television, has seen its stock soar from $4 a share in June to a peak of $52 on Aug. 11. In the seven days of trading before Wednesday’s run-up, the stock slumped from $45 to close Tuesday at $23.625.