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Oct 25, 2016

S3 BLACKLIGHT: Shorts Busy Ringing Up Telecom Italia

Short selling in Telecom Italia (TIT IM), the Milan-based telecom carrier, has seen a massive spike in volume since the beginning of October.  According to the S3 Velocity Indicator, a measure of the real-time relative change in shorting activity, the 7-day moving average trend line is up 70% since the start of the month on a notional basis, from roughly €580million on Oct 3rd to €995million currently.  This is despite upbeat commentary by several analysts ahead of the company’s upcoming earnings call scheduled for 11/4.

Shares have rallied 15% since hitting a low of €.69 over the past 30 days of trading.  During this time, short sellers increased their positions by a noteworthy amount on two separate occasions.   According to the S3 Crowding Indicator, a measure of the magnitude of real-time shorting activity relative to market cap and float, a crowding score of 5.19 was displayed on Oct 17th, and an even larger score of 9.78 was registered on Oct 21st.   Our proprietary analysis has shown that when crowding “events” hit a score of 5 or higher, cost to borrow the security to sell short trends more expensive, proving correct in this case.   It will now cost short sellers close to 80 basis points on an annual basis, opposed to 40 basis points just two weeks ago.   

With shares down 32% year-to-date, short interest trends are certainly indicating the bears continue to dial up their bets for further downside.  

For more information on the above analysis, please contact:
Matthew Unterman, Director, S3 Partners, LLC    

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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