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Nov 8, 2016

S3 BLACKLIGHT: Burlington Stores Short Interest Exposure at an All-Time High

Spruce Point Capital Management, who came out with a bearish research report on 11/3 seeing 20-40% downside to Burlington Stores (BURL US) share price, is apparently not the only one shorting the discount retailer. Estimated short interest currently stands at $473 million in exposure, an all-time high looking back to its 2013 re-IPO by Bain Capital. 

The last time short exposure came close to its current level was at the end of January 2016, when it hit its previous year-to-date high of $439 million.   Over the next six months, the short interest trend had been skewed to the downside, hitting a 2016 bottom in June of $325 million in exposure, a drop of 26%.  However, since hitting that mid-year low, short exposure is back up 46% to the all-time high we currently estimate today.

Unsurprisingly, Burlington finally responded to Spruce Point yesterday, “emphatically denying” the short seller’s allegations of “aggressive” financial and accounting tactics to “beat and raise” quarters.  With 3Q earnings due to be announced on 11/23, Spruce Point and short sellers who believe that the company’s current valuation is too rich may be rewarded this time around.  A “miss and lower” is certainly not out of the realm of possibility, especially now that the “coat” may be out of the bag.

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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