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Sep 29, 2016

S3 BLACKLIGHT: The Well is Running Dry for FIZZ Short Sellers

Activist short seller Glaucus Research Group published a report on Wednesday questioning National Beverage Corp’s (FIZZ US) accounting practices and corporate structure. Glaucus is looking for regulatory investigations into the firm’s practices and sees a valuation of $16.15 for the firm. FIZZ is trading at $43.48 today. National Beverage is vehemently denying the accusations and stands by its financial reporting and corporate practices.

FIZZ short interest from 2009-2014 averaged $5 million and short sellers only became more active in the 4th quarter of 2015 when short interest rose to $22 million. Short selling remained quiet until June when balances hit $45 million. Short interest then doubled in the next two months and neared $100 million by the end of August. September short activity accelerated again, up 28% in the month and is $125 million today.

FIZZ borrow supply will be very limited as the CEO & founder, Nick Caporella, owns 74% of the float and will not be lending any of his shares to help increase short activity. Stock borrow rates, which were 0.50% fee and below, are now starting to rise as lenders are responding to the sudden increase in demand and tightening supply. There are less than 500,000 shares of stock left to borrow/short before short sellers have to rely on more expensive and unstable stock borrow supply in order to execute their shorts. We expect FIZZ stock borrow rates to reach the 10% fee level shortly.

If FIZZ’s stock price drops significantly in the future, it will be because long shareholders are selling out of their positions and not short sellers increasing theirs. In fact, of the 5.3 million shares of trading in FIZZ on 9/28 when its stock price fell 8%, less than 500,000 shares were short sales.

For more information on the above analysis, please contact:
Ihor Dusaniwsky, Head of Research, S3 Partners, LLC     Ihor.Dusaniwsky@S3Partners.net

The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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