Tracking short interest

[neroden]

Certainly we saw something similar with TSLA in 2013? Longs had $100+ as a price target and a huge percentage of shares were shorted. Similar to SCTY right now, at least the price to short was similar.

Yeah, there's something similar to a short squeeze, but not as extreme, which is often *called* a short squeeze, but isn't actually a classical short squeeze; it's more accurately a mass "short unwinding". We had one of those.

This is when a huge percentage of shares are shorted and then the price starts to go up and up. Shorts get margin calls and have to cover and that drives the price up even further, and eventually all the shorts bail out and cover.

The difference: It's not a classical short squeeze unless the shorts actually have trouble finding shares to buy because nobody is selling. In a classical short squeeze, you'd see the bid price go up and up but you'd see the ask price jumping up by leaps and bounds, with very low trading volume; it can spike 500% or more in a single day.

In a less-severe short unwinding you have more normal trading volume, and the price rises a lot and quite fast but not at that astronomical speed.

 

[GoTslaGo]

Yeah, there's something similar to a short squeeze, but not as extreme, which is often *called* a short squeeze, but isn't actually a classical short squeeze; it's more accurately a mass "short unwinding". We had one of those.

This is when a huge percentage of shares are shorted and then the price starts to go up and up. Shorts get margin calls and have to cover and that drives the price up even further, and eventually all the shorts bail out and cover.

The difference: It's not a classical short squeeze unless the shorts actually have trouble finding shares to buy because nobody is selling. In a classical short squeeze, you'd see the bid price go up and up but you'd see the ask price jumping up by leaps and bounds, with very low trading volume; it can spike 500% or more in a single day.

In a less-severe short unwinding you have more normal trading volume, and the price rises a lot and quite fast but not at that astronomical speed.

Given only 137,137 shares available to short TSLA and 0 for SCTY, could this be a strong set up for a classic short squeeze?

 

[justdoit]

It just doesn't make sense. Why would so many people jump to short SCTY with such high rates when there is even a small chance that they'll be acquired? What'll happen to their short position if the deal goes through? Will they have to cover or will it transition to a short TSLA position? Seems like this is a high risk bet they're taking. Do they all really think SCTY will go bankrupt if the offer falls through?

Something just doesn't feel right.

 

[neroden]

It just doesn't make sense. Why would so many people jump to short SCTY with such high rates when there is even a small chance that they'll be acquired?

I think they're out of their minds. With borrowing rates as high as 60% for SCTY, they are spending a fantastic amount of money just maintaining their position. I see no way for them to do well on this. (Notably, at this interest rate, if SCTY survives for 1 year and 8 months and then goes bankrupt, *they still lose money*.)

What'll happen to their short position if the deal goes through? Will they have to cover or will it transition to a short TSLA position?

It becomes a short TSLA position.

If as a shorter, you think the deal's going to go through, it would make sense to short TSLA and NOT short SCTY. Because the borrowing rate for TSLA is way lower (more like 16%) than for SCTY (more like 60%). And the SCTY price is less than the price of 0.122 shares of TSLA, which is the lowest exchange ratio -- as a long, this means you buy SCTY for the arbitrage value, but as a short, it means you sell TSLA for the arbitrage value.

This means the SCTY shorters are quite definitely betting that the deal won't go through.

Seems like this is a high risk bet they're taking. Do they all really think SCTY will go bankrupt if the offer falls through?

Presumably. Which is fine; the classic time to short a stock is if you think it will go bankrupt soon (Peabody Coal was a great example where I considered shorting it but missed the window of opportunity). But they're betting simultaneously that (a) the merger will not go through, (b) SCTY will go bankrupt, (c) SCTY will go bankrupt *so quickly* that they won't get eaten alive by borrowing costs. This seems like a terrible, terrible combination bet even if you think SCTY is awful!

Something just doesn't feel right.

No, it seems really odd, doesn't it? I'd love an explanation. Maybe they're not thinking clearly (the "dumb shorts" thesis). Maybe they're making a concerted attack with the intent to cover and get out next week. I dunno.

 

[Yonki]

0 TSLA shares to short at Fidelity...

 

[TheTalkingMule]

Bring the pain Elon!

 

[Rarity]

It just doesn't make sense. Why would so many people jump to short SCTY with such high rates when there is even a small chance that they'll be acquired?

My guess is that SCTY shorts feel like their loss is capped, given that their SCTY short positions will roll over into TSLA short positions. The one thing keeping the SCTY shorts jumpy was the extreme volatility in the stock. TSLA is much less volatile.

 

[esk8mw]

Shorts are basically out of ammo after this morning.

IB shows 23k shares available to short and fee rates over 25%. There were 119k shares available last night. Time for a tsunami.

 

[Yonki]

We just have to get all the longs to hold on and not sell to create an exit path. But I'm sure there are a lot of sell orders that will trip on the way up...

 

[uselesslogin]

Shorts are basically out of ammo after this morning.

IB shows 23k shares available to short and fee rates over 25%. There were 119k shares available last night. Time for a tsunami.

Wow! I just checked now and I see 32%. The thing I don't get is if the SCTY deal fell through that would also be enough to create a short squeeze at this point if you ask me. Otherwise I don't expect bad delivery numbers next week, that much is for sure.

Could the longs be causing this? Like they are thinking now is a good opportunity so some longs are requesting the shares they are lending out back. Therefore driving up the rates of existing shorts even if they aren't adding to their position right now? I guess we'll never really know for sure.

Of course I must throw out option 2 - the shorts know something we don't... I know that always seems unlikely but we should keep it in the back of our minds.

 

[drinkerofkoolaid]

The 100dma is closing in on the upper BB. Will be very interesting to see how this plays out. Are all shorts forced to cover in one day if it's confirmed that Tesla will buy all shares of SolarCity?

 

[Yonki]

Fidelity:
Lend TSLA: 6.0%
Short TSLA: 12%, 137,137 shares available to short

Lend SCTY: 23.5%
Short SCTY: 60.0%, 0 shares available to short

At Fidelity:
Lend TSLA: 6.0%
Short TSLA: 12%, 0 shares available to short

Lend SCTY: 30%
Short SCTY: 60.0%, 0 shares available to short

 

[Yonki]

At Fidelity:
Lend TSLA: 6.0%
Short TSLA: 12%, 0 shares available to short

Lend SCTY: 30%
Short SCTY: 60.0%, 0 shares available to short

At Fidelity:
Lend TSLA: 6.0%
Short TSLA: 13%, 0 shares available to short

Lend SCTY: 30%
Short SCTY: 60.0%, 0 shares available to short

 

[Rarity]

I assumed that the lending rates for everyone would change at the same time, but apparently this isn't strictly the case. Last evening, my Fidelity lending rate for TSLA changed to 6.5%.

In any event, rates at these levels feel like stealing. Very satisfying to clip these coupons.

 

[Yonki]

I assumed that the lending rates for everyone would change at the same time, but apparently this isn't strictly the case. Last evening, my Fidelity lending rate for TSLA changed to 6.5%.

In any event, rates at these levels feel like stealing. Very satisfying to clip these coupons.

Mine's 6.5% now, too. It's possible it was already 6.5% when I updated and I just missed it.

Loving the coupons, too. Knowing the shorts can't borrow without paying through the nose TO US works for me on multiple levels...

 

[Yonki]

At Fidelity:
Lend TSLA: 6.5%
Short TSLA: 13%, 0 shares available to short

Lend SCTY: 30%
Short SCTY: 60.0%, 0 shares available to short

At Fidelity:
Lend TSLA: 7%
Short TSLA: 13%, 0 shares available to short

Lend SCTY: 30%
Short SCTY: 60.0%, 0 shares available to short

 

[neroden]

Geez. I'm still only getting paid 4% to lend TSLA at Schwab. (But we'll see what happens on Tuesday.)

 

[jvonbokel]

Geez. I'm still only getting paid 4% to lend TSLA at Schwab. (But we'll see what happens on Tuesday.)

How do you go about lending shares via Schwab? Complete noob to share lending.

 

[neroden]

You wait for them to ask you!

As noted before, you have to *not* be using margin on the account -- otherwise they can borrow your shares without paying you.'

Go to the Positions sceen, look just below the header, and you'll see an offer if they want your shares... follow the link and you'll get the correct paperwork.

Or call them and ask about "Securities Lending Fully Paid".

 

[Yonki]

At Fidelity:
Lend TSLA: 7%
Short TSLA: 13%, 0 shares available to short

Lend SCTY: 30%
Short SCTY: 60.0%, 0 shares available to short

At Fidelity:
Lend TSLA: 7.5%
Short TSLA: 14%, 0 shares available to short

Lend SCTY: 30%
Short SCTY: 65.0%, 0 shares available to short