Short Report: Bearish position on Digital Ocean falls to five-month lows

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, excluding holidays. As a basis of comparison for stocks discussed below, the S&P 500 index was up 0.1%, the Nasdaq Composite was up 1.1%, the Russell 2000 index was down 0.3%, the Russell 2000 Growth ETF (IWO) was up 0.1%, and the Russell 2000 Value ETF (IWN) was down 0.8% in the five-day trading session range.

SHORT INTEREST GAINERS

• Ortex-reported short interest in Mirati Therapeutics (MRTX) has briefly dipped from its three -month highs around 24% in the fist week of August to 2023 lows of 16.8% early last week just as shares jumped over 40% in the wake of the company’s lower than expected Q2 earnings loss along with positive pipeline updates. The bounce in the stock price seems to have run its course however with the stock down 10% in the five-day period covered through Thursday, bringing the bears to the fold. Estimated shorts as a percentage of free float were up about four percentage points this week to 22% – a two-week high.
• Estimated short interest in software company Ebix (EBIX) has tracked in a narrow 19.4%-21.7% range for a period of five months until this week even as the stock has nearly tripled from April 5 through to July 31 peak. A disappointing Q2 earnings print on August 9th that acknowledged the adverse impact on profitability from the rising cost of debt has seen Ebix shares lose over 40% of their value over the following two trading sessions, and the bears are betting on more pain. Short interest as a percentage of free float on the name was up four percentage points to 24.7% this week, the highest level since November of 2022, while the stock has remained under pressure with a 6.2% decline.
• Ortex-reported short interest in lithium-ion battery manufacturer Enovix (ENVX) had seen a slight retreat from the elevated levels around 26% in late July, when the company reported a narrower than expected Q2 earnings loss, through this Wednesday’s 24% level. With the stock testing a three-month low and reversing all of its summer gains however, bears are building their positions again however, with Thursday seeing an increase in shorts to 27.1% – the highest level in four months. In the five-day period covered this week, Enovix shares were down 5.4%. The decline from August 9, when the company announced a $1B mixed shelf offering, also amounts to about 25% for Enovix shares.

SHORT INTEREST DECLINERS

• Ortex-reported short interest in Digital Ocean (DOCN) has been on the downward path for a period of three weeks since the company’s stock price took a large hit on August 3. The management had pre-announced in-line Q2 revenues but guided Q3 and FY23 below consensus and also disclosed that it is still not in position to report earnings as it continues to account for tax expense related errors in its financials. The stock was down 2.3% in the five-day period through Thursday and has now declined about 32% since that disclosure, though the bears are still in profit-taking rather than double-down mode, with shorts as a percentage of free float down from 23.5% to 19.7% this week – the lowest level in about five months.
• Estimated short interest in Allogene Therapeutics (ALLO) has also been on a steady decline since the company reported Q2 results on August 2nd, while the initial jump in the stock price has fizzled over the past three weeks. Shorts as a percentage of free float in Allogene were down from 35.6% to 30.6%, the lowest level since October of 2022, while days to cover on the name has come in by about 30 basis points to 6.8 amid reduced trading volume. In the five-day period covered this week, Allogene shares were down 4.8% and have now lost about 30% from their post-earnings peak on August 3.