Short Report: Dave & Busters bears boost exposure

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 0.7%, the Nasdaq Composite was up 1.9%, the Russell 2000 index was up 2.0%, the Russell 2000 Growth ETF (IWO) was up 2.3%, and the Russell 2000 Value ETF (IWN) was up 0.8% in the five-day trading session range through September 18.

SHORT INTEREST GAINERS

• Ortex-reported short interest in Dave & Busters Entertainment (PLAY) has continued on its upward sloping path now about seven weeks in the making, which is also coinciding with a slump in the stock price. This week, in the wake of its Q2 earnings disappointment that yielded a 17% next-day drop, shorts as a percentage of free float rose from 26.8% to as high as 31.1% – a two-month high – before settling at 29.4%. Similarly, days to cover rose from 5.7 to as high as 7.3 – a three-month high. The stock of the entertainment chain, meanwhile, was down 11.5% and has now shed 45% from its July highs. Shares of Dave & Busters are also down 33% year-to-date.
• Ortex-reported short interest in VNET Group (VNET) had fallen for two straight weeks from over 22% to under 19% as the stock price action coiled in a narrow range for much of August, but with this week’s breakout in shares, the bears are also emboldened. Shorts as a percentage of free float was up from 18.9% to 21.4% – within a point of four-month highs – while days to cover on the name was up from 2.4 to 3.6. The Beijing-based internet data center services provider gained about 9% in the five-day period covered, hitting six-month highs, and year-to-date, the stock is now up 92%.
• Ortex-reported short interest in Westrock Coffee (WEST) bottomed around 34% over the final week of August but has now risen for three consecutive weeks. This week, shorts as a percentage of free float on the stock was up from 37.4% to 40.8%, with days-to-cover ratio also jumping from 18.7 to 21.4. Shares of the small-cap coffee distributor, meanwhile, have found a multi-week long support around the dreaded $5 per share threshold but have still shed 24% from the company’s pre-Q2 earnings levels and are now down 21% year-to-date. This week, Westrock was off by 7.7% despite the risk appetite in the broader market.

SHORT INTEREST DECLINERS

• Ortex-reported short interest in Applied Optoelectronics (AAOI) had been rising for four consecutive weeks in step with gains in the stock price as bears were not prepared to underwrite the maker of networking equipment powering AI datacenters, reaching a 6-week high above 23% late last week. This week however, the bears were notably less convinced in their thesis and reduced exposure, with shorts as a percentage of free float on Applied Optoelectronics falling from 23.4% to 21.1% and days-to-cover slipping from 5.0 to 3.7. A high-volume short squeeze rally in shares on September 10th may have catalyzed the reversal, with the stock jumping 17% in a single day on the announcement of four new software modules being added to its QuantumLink HFC Remote Management solution. The momentum has persisted this week with a 8% advance in the stock price in the five-day period covered. The stock has now nearly tripled from its April trough.
• Ortex-reported short interest in Dianthus Therapeutics (DNTH) has plummeted from 40.8% to 28.6% this week as bears rush to the exits on spiking share price. Over the past two weeks, Dianthus is up 50%, though much of it was gained in the first few days of the surge – the five-day period covered for this week only saw shares advance about 3%. Positive data for Claseprubart, or DNTH103, from the Phase 2 MaGic trial in Generalized Myasthenia Gravis presented pre-market on September 8 has spurred the frantic bullish activity, and Wall Street has taken notice – analysts with Evercore called the readout a “bull case outcome” while Baird noted the readout said the data in gMG is supportive of a differentiated profile. Both firms also raised their price targets, and the average 12-month Street target is now $68.83, according to TipRanks, still 87% above Friday close levels.