Carvana Co. (CVNA US) Â 22.40 million shares / 58.49% of float / $1,299 billion notional / 2.40 fee borrow cost.
At $1.291 billion, Carvana (CVNA US) is the largest short by market value in the Automotive Retail industry with KMX US, AZO US, ORLY US and AAP US rounding out the top 5.
While it is the largest short by MV it is also the worst performing short in the Automotive Retail Industry in 2019 with bearish speculators down ($560,362,725) in net P&L or (66.81%) YTD.Â
Shares of Carvana (CVNA US) are up 68% YTD and 33% from their 2.27 earnings call.Â The rise in share price was spurred on by bullish analyst reports showing an acceleration in retails orders, locations and revenue will fuel further growth.
Despite the bullish sentiment, recent price action and massive paper losses, shorts have been holding strong and not markedly reducing their positions.Â This is most likely a result of, low borrow costs to end 2018 and begin 2019 as well as $417,704,999 in profits from 9.1.18 to 12.31.18.Â In fact, Carvana was the most profitable short in the Automotive Retail Industry over that period.
Could Carvana be setting up bears for a â€śShort Squeezeâ€ť, forcing them out of the trade?Â At 58.49% of float, supply for new borrows is limited.Â As supply becomes limited the borrow fee should increase from current level of 2.40, making the cost of carry more expensive for shorts, eating into their profits.Â Additionally, if Carvanaâ€™s price continues to rise so do the losses for the shorts, further diminishing their 2018 profits.
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Managing Director Predictive Analytics, S3 Partners, LLC
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