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Apr 11, 2017

S3 BLACKLIGHT: Shorts Down $151 million on Jana’s 8.3% Stake in Whole Foods

Short interest in the Food Retail sector increased by $221.7 million over the last 30 days, bringing total short interest to $3.0 billion. The top 5 shorts in the Food Retail sector are seen in the above chart.

Jana Partners, LLC has acquired an 8.3% stake in natural food supermarket operator Whole Foods Market Inc. (WFM US) and has indicated they are looking for alternative management strategies and the possibility of a sale to unlock shareholder value. In order to reverse a six quarter decline in same store sales, Jana will be looking to nominate three board members and implement wholesale changes in its growth strategy and operational procedures.

Although Jana is looking for internal changes to turnaround WFM’s revenues, they admitted that “the most upside would be with a sale.” As a result, WFM’s stock price is up $3.10, or 9.98%, today.

WFM short interest has increased to $1.4 billion, up $544 million, or 65%, in 2017. The last time WFM short interest levels were this high was in July 2016 when the stock hit a peak of $34.57.

WFM short sellers did well in 2016, up $51.7 million, or 4.53%, on an average short balance of $1.14 billion. Prior to today, 2017 has not been going as well, as shorts gave back $25 million of their P/L for a negative return of 2.41% on an average short position of $1.04 billion. Today’s $3.10 WFM price increase added an additional $150.9 million of mark to market losses to the short seller’s ledgers. They are now down 14.54% for the year.

We saw both short activity and short covering activity today – the next few days should show us whether short sellers believe Jana can succeed in unlocking WFM’s value via restructuring or sale whether or this 10% price bump was a temporary reaction to good news in an otherwise stagnant sector.

Want deeper insight into the above analysis? Contact:
Head of Research, S3 Partners
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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