Short Report: Bad News Bears continue to claw Silvergate, Futu Holdings

Short interest in Silvergate and Futu Holdings expands to fresh record highs as bad news flow spreads on both names

Welcome to this week’s installment of “The Short Interest Report" – The Fly’s weekly recap of short interest trends among some of the most widely followed high-short-float stocks. Using the data from our partner Ortex.com, which utilizes the latest information from stock lenders to estimate short interest changes for thousands of publicly traded companies, this report will screen for some of biggest changes in short interest as a percentage of free float and days-to-cover ratios while also considering the short interest data on some of the more volatile and heavier-traded names of the week. Based on the availability of data from Ortex, the report tracks the trading period that covers prior Friday through Thursday of this week. As a basis of comparison for stocks discussed below, the S&P 500 index was down 1.0%, the Russell 2000 index down 0.7%, the Russell 1000 Growth ETF (IWF) was down 2.3%, and the Russell 1000 Value ETF (IWD) was flat in the four-day trading session range.

SHORT INTEREST GAINERS

• Estimated short interest in Silvergate Capital (SI) continued to climb this week, rising from 57.2% to 64.6% – a new record high for the stock. Short position in the crypto focused bank has gone up six-fold in nearly two months as investigations into the company’s dealings with FTX percolate while customers pull their funds en masse. This week, Silvergate Capital warned that its Q4 would have a 68% sequential decline in digital asset deposits and laid off 40% of its workforce. The stock got pummeled, falling another 24% in the four-day period covered by this report.
• Ortex-reported short positioning in another crypto oriented name – MicroStrategy (MSTR) – had corrected from an-all-time high of 43% in early December to a seven-month low of 34% late last week, but bears appear to be returning to the stock. Estimated short interest in MicroStrategy was up two percentage points to 36% in the four-day period through Thursday, even though the stock was bid higher in the period, rising 14.5%.
• Estimated short interest in Futu Holdings (FUTU) jumped from 16.4% to 19.7% this week – a record high. Days to cover change was also especially pronounced, spiking from 1.1 to 2.3. Shares of the Hong Kong broker were slammed by the announcement that China Securities Regulatory Commission requested that the company halts taking new onshore investors as customers with allegations that their "act has constituted illegal operation of securities business according to the Securities Law and related regulations." In the four-day period covered, Futu Holdings fell 22%.
• Bed Bath & Beyond (BBBY) pre-announced Q3 sales well below expectations this week and also warned that in spite of all of its efforts to address liquidity and improve its cash position, there is “substantial doubt” that the company can continue as a “going concern” based on its performance over the most recent holiday period. Estimated short interest on the name rose another percentage point to 37% , a six-week high, and days to cover on the name remained around 5.2. Volumes spiked and shares cratered – in the four-day period covered, Bed Bath & Beyond traded down 33%.

 SHORT INTEREST DECLINERS

• Estimated short interest in Fate Therapeutics (FATE) had been trending down for about four weeks, slipping from 26.9% in early December to as low as 21.5% this past Thursday – the lowest level in seven months. The decline had accelerated this week as it accounted for nearly three percentage points. Days to cover has also caved all the way to 2.8 from 7.3. While the stock price had been cut in half during December however, the paring of short bets was clearly premature – Fate Therapeutics fell sharply on the announcement after market close on Thursday that it is discontinuing its collaboration with Johnson&Johnson (JNJ) Janssen Therapeutics and cutting staff to preserve its cash position and extend its runway. The stock was up 10% in the four-day period covered through Thursday but got slammed by 61% on Friday, with a number of research analysts cutting their ratings and expressing concern about its near-term catalysts.

Keywords: Short selling, short interest, days to cover, securities, lending, utilization, sentiment analysis, Silvergate MicroStrategy, Futu Holdings, Bed Bath Beyond, Fate Therapeutics