Snap Inc (SNAP) is the fifth largest short in the U.S. Interactive Media and Services Sector. For the first half of 2019 short sellers were busy covering their positions, buying to cover 25.8 million shares, -19% of their exposure, as SNAPâ€™s stock price almost rallied +187%. Since mid-June, even though SNAPâ€™s stock price rose by +12%, short sellers rebuilt their SNAP exposure and shorted 35.2 million shares, an increase of +46.8%.
SNAP short sellers cannot be blamed for cutting their exposure dramatically in 2019. With SNAP up 187% for the year, shorts are down -$1.12 billion in year-to-date mark-to-market losses. Short sellers have begun recouping some of their year-to-date losses recently, shorts are up +$100 million in mark-to-market profits in August and September.
SNAP short sellers have been steadily building their positions for the past three and a half months and we saw just over 4.7 million shares shorted in the last week as SNAPâ€™s stock price fell -7.7%. We should see continued short selling as SNAPâ€™s rally seems to have taken a breather. Recent short activity may be an indication that short sellers are sensing that SNAP is ready for a pull back and will give back a portion of the almost 200% of returns from earlier in the year. Shorts may be betting that SNAPâ€™s increase in daily users may not meet its lofty expectations and its October 24th earnings report may not be as big of a â€śbeatâ€ť as needed to shoulder todayâ€™s lofty valuations.
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Managing Director Predictive Analytics, S3 Partners, LLC
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