Fiserv Inc. (FISV) will be reporting second quarter earnings results on Thursday, July 25thÂ and short sellers have been busy building their short exposure ahead of the announcement. FISV is the most shorted stock in the worldwide Data Processing & Outsourced Services Sector with $5.3 billion of short interest; 55.78 million shares shorted; 14.31% of its float and a 0.30% (general collateral) stock borrow fee.
FISV was a relatively lightly shorted stock prior to the January announcement that it would purchase First Data Corp (FDC) for $22 billion in an all stock deal. FISV short interest jumped from $463 million prior to the announcement, to over $3 billion by the end of January as merger arb, momentum and value traders built their short positions. FISV shares shorted have increased by 49.3 million shares, +760%, for the year.
Recently, weâ€™ve seen continued short selling prior to its second quarter earnings announcement. Shares shorted are up 4.6 million shares, +8.99%, in July and 3.2 million shares, +6.15%, over the last week even as the company hit a year-to-date high of $96.87 last Thursday, July 18th.
Short sellers have been building their positions even as FISVâ€™s stock price rallied for most of the year. Shorts were down $207 million, -14.95%, in mark-to-market losses in January as the FDC purchase was announced and another $584 million, -14.88%, in losses from February to July as 19.2 million of additional shares were shorted. With a total of $791 million of year-to-date mark-to-market losses in 2019 and short selling still continuing all year long, the buildup in short interest is more than a merger arb position and shorts may be looking for results that donâ€™t live up to the expected $0.84 EPS and $1.5 billion in revenues, according to Bloomberg.
We saw just over one million shares shorted yesterday as shorts continue to build their FISV short exposure. Whether FISV beats or misses its second quarter expectations, there will probably be some short covering after the earnings announcement. Shorter term short sellers will either rush to close their positions to limit losses on an earnings beat, or close their positions to realize profits on an earnings miss.
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