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Mar 13, 2017

S3 BLACKLIGHT: Short Sellers Keen on Keane Group

Keane Group (FRAC US), a provider of oilfield services to the fracking industry and this year’s first U.S.-listed initial public offering, has been on a slippery slope downward since opening at $22 per share back in January.  The shares have lost almost 30% of its value since that first day of trading, with bearish bets continuously on the rise.

According to the S3 Black App, short interest exposure (money at risk) has risen to $147.7 million as of 3/10, a 181% increase from 1/31, when the exchange first reported short exposure of $52.5 million.  Data shows that the cynics are certainly not heeding the call of Wall Street, where the majority of research analysts initiated either an overweight or outperform rating on 2/14, with an average price target of $25.  In fact, shares on loan to short sellers increased from 5.4 million shares ($112 million) on 2/15, to 7.8 million shares ($135.9 million) on 2/28, proving bearish sentiment heightened during that time frame.  

More recently, both Citi and BofAML have upgraded the shares as well, citing the extended sell-off and pricing power upside as just a few factors making the stock a compelling buying opportunity at its current valuation.  With Keane’s first earnings release expected tomorrow after-market on 3/14, investors will be focused on pricing trends and margin as a measurement for the future prospects of the company. 

Short sellers have enjoyed a mark-to-market paper gain of $50.1 million since Keane first listed its shares back in January, a slick return of 39%.  There is certainly no denying that the shorts have made the right call on the stock so far.   

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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