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Nov 16, 2016

S3 BLACKLIGHT: GrubHub Short Interest Exposure at Multi-Year Low

Don’t blame shorts sellers for the declining stock price in GrubHub (GRUB US).

Short interest is currently estimated at $331 million in exposure, a level that hasn’t been touched since the summer of 2015.  In fact, short interest is down 60% since hitting an all-time high of $824 million in short exposure back in July of 2016.  It would have cost as much as 300 basis points on an annual basis to carry this short then, but now, new borrows are trading at the lowest carry cost since its IPO back in 2014, at general collateral/cheapest rates. 

The founder and CEO certainly didn’t help the stock price after sending an anti-Trump company-wide email to employees the day after the election.  Although he has since clarified his stance and apologized, shares are down 7% since that internal memo went viral nationwide.  Even more concerning is that the stock price is down close to 13% since reporting Q3 results at the end of October, with investors concerned with user growth, a key metric when evaluating the future prospects of a technology company.   
Looking ahead, if pro-Trump consumers decide to boycott the company due to the founder’s seditious remarks, the potential damage will be reflected in Q4 results.  And you can bet short sellers will be “hungry” to re-position themselves ahead of earnings to capture the alpha on the 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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