Short Report: Bearish positioning in Beauty Health Company at 2023 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 down 2.2%, the Nasdaq Composite was down 3.1%, the Russell 2000 index was down 2.0%, the Russell 2000 Growth ETF (IWO) was down 3.6%, and the Russell 2000 Value ETF (IWN) was down 3.6% in the five-day trading session range.

SHORT INTEREST GAINERS

• Ortex-reported short interest in AST SpaceMobile (ASTS) had not topped 21.5% since late June of this year before this week. Likewise, the stock has been trading sideways since shares fell nearly 20% on June 27th when the company priced a 12M share offering. The catalyst for volatility and increased bearish appetite this week however was the announcement that AST secured a $100 million strategic financing from Atlas Credit Partners. By Thursday, shorts as percentage of free float increased from 20.7% to a seven-week high of 22.0%, while shares in the five-day period covered declined 8.9%.
• Estimated short interest in Biomea Fusion (BMEA) hit a six-week low of 34.1% last week but jumped to as high as 38.3% this Wednesday as the stock fell over 11% with no discernible news flow. This level of bearish position as a percentage of free float for Biomea matched the highest level on record last seen in mid-July. The company last reported Q2 results on July 31, and following an initial thrust lower, shares have traded in a narrow range for much of the first half of August. In the five-day period covered through Thursday, Biomea shares were down 8.8%.
• Ortex-reported short interest on Franchise Group (FRG) rose sharply this week from 31.8% to 41.7% – the highest level on record – while the stock traded flat in the five-day period covered. Pre-merger short interest volatility is unusual as the company had announced that it was being acquired by a consortium that includes B. Riley Financial, Inc. and Irradiant Partners back in May, and this week, the stockholders of Franchise Group approved all proposals related to the proposed acquisition. Shares of Franchise Group will cease trading and will no longer be listed on the Nasdaq following the closing of the transaction next week.

SHORT INTEREST DECLINERS

• Ortex-reported short interest in Beauty Health (SKIN) has tracked in the 23% to 26% range for a period of about two months prior to this week, as bears have responded to a more pronounced pullback in the stock price with reduced exposure. Shorts as a percentage of free float was down from 24.2% to 21.4%, the lowest level since last October, while days to cover on the name retreated to 8.4 from 9.2 despite the pickup in trading volume. A worse than expected set of earnings for Q2 released on August 9th has sparked the selling while multiple sell-side analysts cut their price targets in consideration of the company’s challenges. The stock was down 18% in the five day period covered, though shares squared about half of those losses today with an 11% gain as multiple company insiders stepped in with buying activity.
• Estimated short interest on SpringWorks Therapeutics (SWTX) had risen above 30% level – the highest mark since August of 2022 – back in late June and then tracked in the 35%-40% range for much of July-August. This week however, shorts as a percentage of free float fell from 37.5% to 34.3% – a seven-week low. The stock had also run up about 20% from trough to peak over the prior week, driving a short-squeeze, though it has slowed its advance this week even as the bearish positioning has been shaken out, with more modest gains of about 2% in the five-day period covered through Thursday.