Bearish speculators are amping up their bets against GoPro (GPRO US) in October, as short interest is now reaching highs last seen since at the beginning of the year.
S3 Partners calculates real-time short interest to be 34.5 million shares, equating to 35.7% of the float, with $324.6 million of real money at risk wagering on a price decline.
This is an increase of 39.5% and 41.4%, respectively, when measured on a shares shorted and dollars at risk basis, since the end of August when 25.7% of the floated shares were being utilized by short sellers.
A catalyst for the recent surge in short interest we have seen could be directly attributed to Alphabet Inc. Google’s announcement of a new smart video camera Clips, which is a potential competitor to GoPro’s Hero. Although some analysts are now calling the immediate GPRO stock sell-off a bit overblown, short sellers continue to increase their positions.
Short conviction is so high on GPRO that spot rates for the limited availability left to borrow has spiked to fees as high as 40% range today. This is despite bears being down $93.1 million, yielding a negative 34.5% return year-to-date, net of financing costs.
With 3Q earnings due to be announced next week, another surprise beat may send the shares roaring higher, with the added help of a squeeze due to the elevated short interest.
Want deeper insight into the above analysis?
Contact: Matthew.Unterman@s3partners.net Director, S3 Partners
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