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Jul 14, 2017

Short Sellers Raising the Ante on Caesars

Bearish bets against Caesars Entertainment (CZR US) currently stands at an all-time high when measured on both a notional and share basis.  S3 Partners real-time analytics currently computes that the dollars (at risk) exposed to the short side currently sits at $395.1 million, with 31.6 million shares shorted.  This is an increase of 344% and 202%, respectively, since the start of 2017 when $89 million was at risk and 10.5 million shares were being borrowed. 

Despite the stock price surging over 47% so far this year, bearish speculators continue to raise their bets against the company and build their positions.  This is in light of short sellers having a mark-to-market paper loss of $85.1 million, yielding a negative 39.4% return year-to-date based on an average short position of $214.6 million.  

Financing rates (or the cost to carry borrowed shares) are also reflecting this steady demand to short the gaming company, with spot rates now trading in the 7% fee range on an annualized basis and trending higher.  Existing shorts should anticipate these increased costs from their prime brokers as lenders pass along rate changes to garner additional yield on this “hot” borrow.  

Comparing the price action and short interest trends, longs continue to drive the stock higher (as shorts have not contributed to the upside by covering positions yet).  With over 55% of the floated shares currently in the hands of short sellers, Caesars is a prime candidate for a potential squeeze.  This is a gamble that bearish speculators seemingly are willing to take.  

Want deeper insight into the above analysis?
Contact:  Matthew.Unterman@s3partners.net
Director, 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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