Towards the end of March a lot of posters were incredulous on the increasing short interest and the hard to justify risk-reward scenario of shorting from $16 to $12 for example versus the unlimited downside risk to a short squeeze and covering much higher ($30, $40 or more?). Even L10 couldn't believe the amount of building short interest leading up to Q2.
But now we have a new piece of evidence in the direct offering that seems to explain that this was a "safe short" knowing the stock price would be forced down by the coming dilution. While I realize it is illegal to short the stock with knowledge of the price of the coming offering, it's not like the law has stopped people before.
The question I'd pose now is if we can see any definitive data in the upcoming short interest to be released that validates a spike/peak in short interest prior to the offering, and a much lower short interest post offering. This would confirm a floor in the stock price and demonstrate the less attractive risk/reward profile that would suggest shorting is simply a bad idea at this stage with Ph II data unknown. I checked Nasdaq website but short interest is only posted through 3/31 at a whopping 1.2MM shares.
I've been trading options for years.. option calls and puts and short interest are not related whatsoever. Coincidentally they may be from time to time.. but that's just a coincidence. I have seen huge short interest, and virtually no put volume. We all know the stock tanked from $20/share down to $10/share. Go check out the put (ask) volume during that period, and you wont' necessarily see the same correlation.
Share Price relative to date and PIPE events
Settlement Date,Short Interest,Percent Change,Average Daily Share Volume,Days to Cover
April 8 announcement SP $9.84
April 7 private equity placement. SP $12.73
Mar.31/2014 1,219,416 30.18% 232,561 5.23 SP $13.61
Mar.14/2014 936,738 180.70% 390,675 2.40 SP $19.95
Feb.28/2014 333,720 15.38% 241,349 1.38 SP $14.15
Feb.14/2014 289,229 687.06% 583,830 1.00 SP $13.34
Jan. 31/2014 36,748 (4.83%) 140,017 1.00 SP $ 9.23
Jan 18/2014 Shelf registered SP $ 9.00
Jan.15/2014 38,612 6.72% 71,688 1.00 SP$ 9.33
Remember short numbers preceded actual posted positions by 2 wks
looks like SP started going up and short numbers spiked 687% as the deal was shopped around and probably in the works by Feb.14. A month later whom ever pushed the SP up to $19.95 reflecting another 180% short increase spike. The deal obviously invited in a shrewd financial player to effectively game the market. If this doesn't smell fishy then the state of Denmark isn't in the Baltic
I'm not sure of the mechanics of settlement for offsetting positions. The next short interest report will be for the 4/15 settlement date. IIRC, the closing for the new deal is today, 4/11. If T + 3 is involved, the 4/15 short interest report would not yet show any offsets, I would guess. But I'm outta my depth regarding this. Any of you traders types know the details?
Of course, the other part is what will the next couple of short interest data points really mean? Each release is just one number, and doesn't show who nor why. So probably a rough tool at best.