After hitting its year-to-date high of $166.95/share on March 21st, Salesforce.com Incâ€™s (CRM) stock price has slid almost -16% to $140.72/share. CRM continues to be the most shorted stock in the Application Software sector with nearly double the short exposure than runner-up Adobe Systems Inc.
Although CRM shares shorted have increased by 12.66 million shares, an increase of $1.8 billion or 115.04%, in 2019 we are seeing a dramatic reversal of sentiment in August with shares shorted decreasing by 7.05 million shares, -$992 million or -22.94%.
This billion dollar decrease in CRM short exposure was not due to a short squeeze. CRM stock borrow rates are at general collateral levels, the easiest to borrow securities as the cheapest borrow rates, total borrow financing costs for the entire year were not onerous, totaling only $4.1 million of stock borrow costs on an average short position of $2.2 billion. A profit shortfall is not the reason for the short covering either. CRM shorts are up $173.6 million, +7.85%, in year-to-date mark-to-market profits and up $380.5 million in mark-to-market profits in August when this short covering occurred.
If profitably and trading expenses did not cause this new short covering trend, then it may be a signal that shorts are beginning to jump ship and looking for more profitable short targets elsewhere. Shorts may be seeing a consolidation in the $141-$143 level with a possible breakout to the upside.
This billion dollars of short covering may be the canary in CRMâ€™s coal mine. If shorts continue to exit their positions, it may be a signal that CRM is due for a rally.
Want deeper insight into the above analysis?
Contact:Â [email protected]
Managing Director Predictive Analytics, S3 Partners, LLC
For more information on S3â€™s reporting, data and analytics solutions, email us at [email protected]. Start your free trial of the BLACK App â€“ the only source of real-time short interest on the Bloomberg Terminal or Thomson Reuters Eikon.
For short side data and access to our research reports go to https://shortsight.com/ .
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (â€śS3 Partnersâ€ť) to be reliable and accurate.Â 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.Â 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 decisions.