Carson Block, the infamous short seller who runs Muddy Waters Research, broadcasted to the market today a short position in St. Jude Medical (STJ US). He is certainly not alone, and hasn’t been for some time.
According to the S3 Velocity Indicator, a measure of the real-time relative change in shorting activity, all three trend lines (7, 30, and 90-day) have moved consistently higher since bottoming out in early May, immediately after the acquisition announcement by Abbott Labs (ABT US). S3 Velocity trend lines should continue to slope higher if this new information about the lack of cybersecurity in St Jude devices puts the proposed purchase by Abbott in jeopardy. Short sellers will place bets that Abbott pulls the plug on the deal, wiping away the premium currently priced into St Jude stock, reaping gains.
With agent lenders and prime brokers currently holding ample liquidity, shorts are still able to secure borrow at general collateral levels, and join the “Block” party on the cheap.
For more information on the above analysis, please contact:
Matthew Unterman, Director, S3 Partners, LLC
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