Short sellers have driven FitBit (FIT US) short interest to its highest level since the company first listed its shares back in June of 2015. With the company due to report 3Q results after the close on 11/2, plenty of focus will be on how well the two newest wearable products rolled out in September helped the bottom line. By the looks of what shorts have been doing lately, bets are being made that it’s going to be an “uphill” battle.
According to the S3 Velocity Indicator, a measure of the real-time relative change in shorting activity, the trend line has displayed a persistent, unabated upward slope since the beginning of October. Our estimate of current short interest as it stands today is now $905million in exposure, an all-time high for Fitbit. Short exposure is up 80% on a notional basis since the start of 2016, coinciding with a plunge of 55% in the stock price. Measuring short interest as a percentage of float, our analysis is estimating as much of 50% of shares are now being borrowed by short sellers. The cost to borrow shares since the beginning of October is also up significantly, increasing from 1% to 5% currently, meaning that demand has pushed lenders to raise rates by 400% over the span of a month.
Fitbit shares are only up 10% from its all-time low of $11.89 hit back in June of this year, and if the company doesn’t “step” up on Wednesday, it is not out of the question shares can re-touch that level or head lower with the help of short sellers.
For more information on the above analysis, please contact:
Matthew Unterman, Director, S3 Partners, LLC
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