The Internet & Direct Marketing Retailing Sector has not been kind to short sellers with year-to-date mark-to-market losses at $2.82 billion, -16.35%. The worst performing short in the sector is Wayfair Inc. (W US) with a year-to-date mark-to-market loss of -$1.07 billion, -65.94% year-to-date return, making up over a third of the sectorâ€™s losses on its own.
Short sellers have been reallocating their exposure in the Internet & Direct Marketing Sector, spreading around their exposure instead of just concentrating it in Amazon.com (AMZN). Wayfair is now the second largest short in the sector, jumping ahead of Booking Holdings (BKNG US) this year with 857 thousand additional shares shorted, +6%, in 2019. In comparison, Amazon.com saw shares shorted decrease by 1.6 million shares, Booking Holdings had an increase of 184 thousand and Expedia Groupâ€™s (EXPE US) shares shorted grew by 59 thousand in 2019.
While Wayfair short sellers are feeling the pain of over $1 billion in year-to-date mark-to-market losses, they are truly reeling after a two day +36% spike in Wayfairâ€™s stock price which cost them $658 million in mark-to-market losses. With Wayfairâ€™s stock price in a soaring trajectory, a continuation of this trend will begin to squeeze short-term and momentum short sellers and force buy-to-covers as mark-to-market losses mount.
Wayfair shares shorted have been relatively flat in February, after a significant run-up in late January, but if its stock price continues to show strength we should see shares shorted dip back into the 14 million share level. With long buyers and short covering buoying Wayfairâ€™s stock price we can expect the stock to continue to test and probably surpass the year-to-date highs it hit today.
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Managing Director Predictive Analytics, S3 Partners, LLC
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