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Rite Aid’s 138% December Surge Costs Short-Sellers $187 Million

Tatiana Darie

(Bloomberg) -- Rite Aid Corp. short-sellers have had a tough December as better-than-expected earnings spurred the stock’s largest monthly gain since April 2009.

With Rite Aid’s heavily shorted stock up 138% this month, their mark-to-market loss amounts to $187 million, according to data provided by S3 Partners research head Ihor Dusaniwsky. The shares were up as much as much as 24% on Friday, extending gains for a seventh session.

Things could get worse for Rite Aid bears if the earnings-fueled rally turns into a long-term advance rather than just a brief surge driven by short-sellers unwinding their bearish bets, Dusaniwsky warned.

“If RAD’s stock price continue its rally or its price stabilizes at these levels I would expect a dramatic short squeeze next week as shorts have been hit with both large mark-to-market losses and expensive stock borrow costs,” he said in an email.

The surprise rally has spooked some bears already as Ride Aid’s short interest has declined to 26% of the free-floating shares, after peaking at 32% in mid-October, S3 data show.

The next catalyst for the stock is company’s investor day in March.

To contact the reporter on this story: Tatiana Darie in New York at tdarie1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Richard Richtmyer, Bailey Lipschultz

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