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Aug 11, 2017

S3 Analytics: Shake Shack Short Interest on the Rise

Shake Shack (SHAK US) disappointed the street last week after reporting a decline in same-store sales for Q2 and disclosed that it was cutting full year guidance.  This downbeat news overshadowed the company seeing strong revenue growth, as the stock price finished the day down by over 5%.

Shares on loan to bearish speculators to sell short are currently at an all-time high since 2015, when the company first listed its shares.  S3 Partners real-time analytics calculates 11.1 million shares are currently in the hands of short sellers, with $353.7 million at risk.  This is an increase of 89.5% and 69.3% since January, when the exchange reported 5.8 million shares were sold short and $208.9 million was at risk.

Due to the increase in demand to borrow shares to sell short, financing rates have started to trend higher after consistently trading at 1% for the majority of the year.  It now costs over 2% for new supply today and is trending higher.  This is still relatively inexpensive, when taking into account that 57.9% of the floated shares are currently being utilized for bearish bets. 

Year-to-date, short sellers have a paper profit of $30.4 million, yielding a return of 10.1% on an average short position of $303.2 million.  With the stock trading above 50x FY18 EPS estimates, bears continue to wager that the high valuation for this premium burger joint gets broiled.  

Want deeper insight into the above analysis? Contact:
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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