• Research

Sep 13, 2016

S3 BLACKLIGHT: Restoration Hardware Short Interest on the Rise

Short interest in Restoration Hardware (RH US), the home furnishing retailer, has been growing steadily since bottoming out back in May.   This is in light of both: a rating’s upgrade by Goldman Sachs to “conviction buy” last month, and last week posting earnings and revenue that topped analysts’ expectation for 2Q.

According to the S3 Velocity Indicator, a measure of the real-time relative change in shorting activity, we have especially witnessed a sharp spike in shorting activity since the beginning of September.  Due to this recent surge, estimated short interest exposure of $550 million is now reaching levels last seen back in January.   Borrow levels in the stock loan market are currently at a multi-year high, changing hands at 2.5% fee range and trending higher.

Additionally, according to the S3 Crowding Indicator, a measure of the magnitude of the real-time shorting activity relative to market cap and float, a large crowding event has occurred over the past day of trading, implying a surge in demand of late.   With an inevitable interest rate hike looming by year end negatively affecting housing-related securities, short sellers are betting that this name is more of a luxury than a necessity for current and future homeowners.  

For more information on the above analysis, please contact:
Matthew Unterman, Director, S3 Partners, LLC    
Matthew.Unterman@s3partners.net

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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