When Best Buy (BBY US), the #1 electronics retailer, reported a better-than-expected rise in 3Q profit and same-store sales on 11/17, shares surged to a new 52-week high in price at the time, closing the day up 14%. So how have short sellers positioned themselves since then? They have pushed short interest exposure to highs that haven’t been seen in close to a decade.
According to the S3 Short Interest projection, a measure of the real-time relative change in shorting activity, we are estimating real-time short interest to be as high as $2.6 billion in exposure on a notional basis, with as much as 57 million shares now out on loan to borrowers. The last time short conviction was this high on the stock was just prior to the financial crisis, July of 2007 through January of 2008, when short interest exposure averaged $2.9 billion during that 6-month span.
Since that 3Q earnings call on 11/17, we are seeing short interest exposure up 73% ($1.5b to $2.6b), short interest as a percentage of float up 53% (13.93% to 21.27%) and days to cover up 61% (5.9 to 9.5). Looking at today’s intraday real-time shorting activity, the trend is pointing to continued bearish bets, as more than 400k additional shares have been sold short today as the stock is up another 3%+, hitting a fresh 52-week high.
With plenty of borrow liquidity still available at general collateral/cheapest rates, shorts are clearly telling the market that it’s in investor’s best interest to sell Best Buy.
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.