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May 2, 2017

S3 Research: Twitter Rally Sees Shorts Flocking to Cover

It’s been all good news hitting the tape for Twitter (TWTR US) lately, which is resulting in shorts trimming back their bearish bets against the company on a share basis.  Last week, Q1 earnings beat street estimates, sending shares up 5%.  Yesterday, the company announced a partnership with Bloomberg for a 24-hour news network, sending shares up another 6%.  Today, Mark Cuban disclosed that he has started to go long shares of the online news and networking service in his portfolio as an artificial intelligence play, pushing the shares up another 4%.

Taking a look at a line graph plotting TWTR stock price vs. S3 Short Interest measured in shares on a real-time basis since the end of February, there is certainly a correlation.  One could conclude that short selling was a contributing factor to the downward pressure on the stock price. 

Since hitting a low of $14.29 on April 7, Twitter shares have surged 28%.  On April 7, the number of shares on loan was 70.3 million.  S3 now calculates 64.3 million shares on loan on a real-time basis, a decrease of 8.5%.  With mostly positive news creating a tailwind for the stock price, the shares may be getting an extra boost as shorts flock to cover.   

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Director, S3 Partners

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