German regulator, Bafin, banned short selling in Wirecard Ag on February 17th, the first such ban on an individual stock in the German market. In the almost two months since the ban came into effect Wirecard shares shorted have decreased by 4.9 million shares, -26.27%, while its share price has increased by $11.09, +9.85%.
The short selling ban has created distinct pre- and post- February 17th trading results:
Wirecard short interest began to climb in late January 2019 and topped out at $2.38 billion on February 19th, after the ban took effect short interest declined by 19% to $1.69 billion. Short sellers were shorting into a declining Wirecard market earlier in the year and covering after the ban with its stock price rebounding almost 10% after February 17th, this recent price move gave back over a quarter of the 27% price drop pre-ban.
With Wildcardâ€™s short sale ban set to expire on April 18th there is a chance, as with other single stock EU short sale bans, that there may be an extension. If not, there may be a surge of short selling once the dam spillways are opened and short sellers can once again build their positions and new short sellers can enter the trade if Wirecardâ€™s price shows any weakness. Since most shorts who had reservations on keeping their positions open have already bought to cover, there should not be any significant buying pressure coming from the short side.
There is a sufficient amount of Wirecard stock available to borrow, over 10 million shares, so if the shorts come out in force once the ban is lifted, Wirecardâ€™s stock price can be in store for yet another reversal.
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Managing Director Predictive Analytics, S3 Partners, LLC
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