Tilray Inc (TLRY US) short sellers are in a bind with stock loan inventory virtually all taken down and ongoing short selling demand forcing stock loan rates up markedly.
Tilray short interest is $265 million; 3.78 million shares shorted; 19.56% of float; 24.40% stock borrow fees on existing shorts and 45% to 110% fees on the new miniscule short sales that are being approved.
Short sellers are still looking for TLRY locates but the cupboards are bare. There is virtually no stock loan inventory left, forcing stock loan rate to climb every time a sliver of stock borrow becomes available. With stock loan trades occurring at irregular intervals and sizes, stock borrow rates have varied dramatically, with lenders charging whatever the borrower can bear. Over the past few days we have seen stock loans cover a broad swath of rates, from 14% fee to 110% fee.
In addition to lack of inventory crushing stock loan rates, we are now seeing a steady drip of stock loan recalls hitting the street. While recalls have not been large in size, there has been a steady, albeit intermittent, flow eating up every snippet of new stock loan availability that hits the street and also forcing rates up on the surviving stock borrows.
Tilray shares shorted had been increasing steadily in the 4th quarter 2019, increasing by 1.49 million shares, or +62% to 3.86 million shares by the end of 2018. Then January 2019 saw a reversal of short sentiment with shares shorted decreasing by 77k shares, -2%, and February and March saw short sellers sitting on their hands with share shorted decreasing by less than 1,000 shares.
With recalls hitting the street and stock borrow rates rising, we should see the shorts with less conviction shaken out of their Tilray short trades as they realize their recent short term gains. Short sellers buying to cover may nudge Tilrayâ€™s stock up a bit, but sellers shorting stock will not be a factor in Tilrayâ€™s stock price for the foreseeable future unless new lendable long inventory hits the stock loan market â€“ Just like President Reaganâ€™s Secretary of State Alexander Haig in 1981, long shareholders are in control here.
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.