Shopify Inc. (SHOP US & SHOP CN) is the second largest short in the Internet Services & Infrastructure Sector but shares shorted have been declining for most of 2019 as its stock price has rallied +127%. Shopify Inc. is a dually listed security, trading on both the U.S. and Canadian exchanges. Total SHOP short interest is $1.41 billion; 4.49 million shares shorted; 4.56% of its float; 0.30% (general collateral) borrow fee.
While shorts have cut their exposure to SHOP in 2019, they still incurred heavy losses. Shorts are down -$1.17 billion, -81.60%, in mark-to-market losses for the year. SHOP is the 9th most unprofitable year-to-date trade for short sellers in 2019.
SHOP shares shorted have declined by -4.88 million shares in 2019, a decline of -52.11% in response to its strong stock performance. Shorts have been covering steadily for most of the year with shares shorted declining by -4.3 million shares worth $1.35 billion, -45.72%, in the first half of 2019 and declining by -598 thousand shares worth $189 million, -11.77%, in the second half of the year.
Excluding a pick-up in short selling late in March, short sellers has been squeezed by SHOPâ€™s 2019 outperformance for most of the year. SHOPâ€™s August 1st earnings announcement will tell us if the squeeze will continue in the short term. Revenues continue to climb, with 1st quarter results up 49.5% year-on-year, and Shopifyâ€™s retailer cloud-based SaaS platform is gaining recurring users at a robust pace (specifically its Shopify Plus platform). If long shareholders push SHOPâ€™s stock price higher after its earnings announcement tomorrow we expect an extension of SHOPâ€™s short squeeze and short covering to push SHOPâ€™s stock price even higher.
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Managing Director Predictive Analytics, S3 Partners, LLC
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