Wirecard AG (WDI GR) short interest traded in a range between $490 and $615 million throughout the first three quarters of 2015 before short demand grew steadily and ended the year up 83% at $1 billion. Wirecard’s stock price was not negatively affected by this short pressure and ended up 15% in 2015. Short interest fell a bit by mid-February 2016 but was still over $900 million when Zatarra Research published a report claiming financial fraud and weak internal controls on February 24th. Wirecard’s stock price, already down 8% year to date, fell to $31.05, or 33% for the year. With Wirecard’s price still slumping short sellers began to close out their positions and realize their profits. By March short interest fell below $800 million and except for a bump up in demand in May stayed below $800 million until July as Wirecard’s stock price rebounded to over $46.
Since the end of July, Wirecard’s short interest has increased by 24%, hitting $950 million this week. As expected, the S3 Velocity Indicator, a measure of the real-time relative change in shorting activity, has been trending upward but the S3 Crowding Indicator, a measure of the magnitude of real-time shorting activity relative to market cap and float, has been showing us clusters of short side easing not crowding.
The reason behind this divergence is that although the amount of short selling has increased since the end of July, the amount of borrowable securities in Wirecard has increased at a higher rate with more long shareholders lending stock. With the increase of borrow supply outpacing the increase in short selling demand we have actually seen the cost to borrow Wirecard stock drop from 30% fee in May to 2.50% fee today.
For more information on the above analysis, please contact:
Ihor Dusaniwsky, Head of Research, S3 Partners, LLC Ihor.Dusaniwsky@S3Partners.net
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