The true short interest against BlackBerry (NASDAQ:BBRY) is higher than has been reported. This is because while NASDAQ reports twice a month on the short positions against all listed companies, the Toronto Stock Exchange only publicly discloses short interest data on the 20 most-shorted stocks on the exchange. BlackBerry is listed on both exchanges.
As of the 15th of April, there were 164.34M shares of BBRY sold short on NASDAQ; but there were also 11.24M shares of BB sold short on the Toronto Stock Exchange (Source: TMX Consolidated Short Positions as of April 15th, 2013). When we add the Canadian-listed short positions to the NASDAQ shorts, we find that 33.32% of the company was sold short as of April 15th.
The next release of short interest data is due out in a few days. Could the short interest have gone up again?
Of the total 524M shares of Research in Motion Inc. (still its legal name), 175.58M have been borrowed by bears. At some point In the future, these bears will need to buy back stock and return it to its owners. To achieve this, someone will have to sell it to them.
Known Long-Term Holders
The total quantity of the public shares available to the shorts for repurchase is limited:
- Prem Watsa's Fairfax Financial holds 51,854,700 shares, 9.9% of the company. He intends to hold long term, believing the fair price to be around $40.
- Mike Lazaridis Holds about 29,800,000 shares, 5.7% of the company. He is committed to a long term recovery and does not plan to sell his shares.
- The executives and other board members hold significant positions in the company, at least 1%.
This leaves only about 83.4% of the total voting shares of the company available for affordable purchase to the shorts.
Unknown Long Term Holders
58% of the public equity of the company is held by institutional investors. Excepting Fairfax, we can't be confident about the time-horizon of the remaining large institutional holders (such as Prime Cap, Viking Global, Manulife, or Yaktman Asset Management).
As much as 42% of the company is held by individual investors. And about these investors, we can make some inferences.
Who are they? Are they value investors following Watsa's horizon and price target? Are they BlackBerry zealots who are customers, enthusiasts and shareholders, committed to the company in the long run? Are they like me, upset about the dishonest and probably illegal market manipulation that has been occurring and keen to make a stand on principle?
If they are, the shorts are going to squirm.
With Q10 looking to be a home-run for the company, and with market sentiment changing dramatically (try a news search for BBRY or Q10 and notice the unprecedented dearth of slanderous headlines), a short squeeze seems inevitable.
To buy the 175M shares necessary to close their short positions against BBRY and TSX:BB, BlackBerry Bears will need to buy about 39% of the 450M common shares which are not now held by known long-term holders. They will have to buy many of these shares from individual investors like me.
There are too many bears in the BlackBerry bushes. They have eaten all the low-hanging fruit. They have started to become problem bears. A rifle is about to sound and BlackBerry bushes are thorny. I don't envy the bears.
Disclosure: I am long BBRY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.