According to an October 28th press release Tiffany & Co (TIF US) â€śreceived an unsolicited, non-binding proposal from LVMH Moet Hennessy â€“ Louis Vuitton (LVMH US) to acquire Tiffany for $120 per share in cash.â€ť TIFâ€™s stock price jumped over 30% in the first hour of trading on the news and shorts finished the day down -$416 million in mark-to-market losses
TIF short interest is $1.26 billion; 9.99 million shares shorted; 8.35% short interest % of float; and a 0.30% stock borrow fee (general collateral.) Even with concerted short covering in the days after the buy-out announcement TIF continues to be the largest short in the domestic Specialty Stores Sector.
While TIF short selling was very active in 2019, with shares shorted still up 1.5 million shares, +18%, we have seen significant short covering over the last month, specifically after the October 28th buy-out announcement. Shares shorted decreased by -6.2 million shares, -38%, over the last month with -4.6 million of that short covering coming after the LVMH announcement. Shorts were squeezed out of their positions due to the abrupt and steep mark-to-market losses they incurred.
TIFâ€™s stock price has given back some of their October 28th gains as long shareholders sold stock to realize some of their unexpected gains. Short sellers have made back +$49.2 million of their initial -$416 million of mark-to-market losses, but are still down -$367.2 million in mark-to-market losses since the announcement.
TIF short covering has continued even as its stock price has slipped a bit as shorts leg out of their positions. Even as TIFâ€™s stock price slid -$1.43 since the 4th, shorts covered -2.4 million, -19%, shares of their short exposure. TIF has the second most short covering, behind ADP US, since last Monday.
If TIFâ€™s stock price continues to hold onto most of its October 28th gains we should see continued short covering as the short squeeze runs its course and short sellers finish legging out of their positions. With the more fragile short sellers already out of the trade, it will probably take another event to create a secondary short squeeze in the stock.
If LVMH sweetens its somewhat underwhelming bid or another buyer jumps into the fray we should see even more short covering as the short squeeze tightens its grip around even the most dogmatic short sellers. But if LVMH refuses to budge on its initial offer and TIFâ€™s stock price begins to slide back down towards the $90â€™s there are around 5 million shares of covered short trades that will be poised to jump back in and nudge TIFâ€™s stock price even further downward.
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Contact:Â Ihor.Dusaniw[email protected]
Managing Director Predictive Analytics, S3 Partners, LLC
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