Panera Bread Company A (PNRA US) was up 7.93% on April 3rd on a Bloomberg report that it was considering selling itself after receiving takeover interest from an unidentified buyer. PNRA’s stock price rose $20.76, to $282.63, blowing past its average analysts target price of $256 but gave back some of those gains on April 4th with the stock closing at $274. This morning JAB Holding Co. (private company) offered $315/share, or $7.5 billion, for PNRA to add to its Keurig Green Mountain, Caribou Coffee and Peet’s Coffee & Tea breakfast holdings and PNRA’s stock price opened up $37 to $311.
Short sellers have been slowly accumulating positions in PNRA since the beginning of 2017 with short interest now up $512 million for the year, or 102%, to $1.01 billion. Short interest had averaged $521 million in 2016 and traded in a relatively narrow range of $465 - $635 million for the second half of the year. Short conviction picked up in 2017 and broke through the $700 million level for the first time in February and $800 million in March. Short interest continued its $100 million per month climb by breaking through $900 million on the first trading day in April and with today’s JAB takeover offer short interest has now climbed over $1 billion.
Short sellers were down 5.47% in 2016, losing $28.5 million on an average short position of $521 million. With PNRA rallying almost 52% in 2017, short sellers have incurred a much larger loss this year. Including this week’s price moves, short sellers are down $340 million, on an average short position of $701 million for a negative return of 48.55%. PNRA shorts are down $165 million this week alone.
There is still plenty of stock left to borrow in PNRA, so there is very little chance of a short squeeze based on stock loan recalls. But with the stock up 19% this week, and the JAB acquisition on solid ground, short sellers may be ready to close out their position before PNRA’s stock price hits JAB’s $315 offer price. We can expect a considerable portion of the 3.2 million short shares to be bought back in the very near future, pushing PNRA’s stock price closer to JAB’s $315 offer.
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Head of Research, S3 Partners
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