Short Sellers Give Microsoft, Yahoo Wide Berth

Surprisingly, there has been barely any short interest in Yahoo! (YHOO) in the past month. You will see from this graph that the percentage of Yahoo's Market Cap out on Loan (%MCOL) to short investors has decreased from 6% to 1% since October 2006, perhaps because even the most savvy of investors believed the bid with Microsoft (MSFT) would go through.

Since April 22nd, the %MCOL has risen from 0.86% to 1.1% on May 1st, but these figures are not particularly significant, and the %MCOL has now dropped down to 1.02% since Friday. Utilization is at 4%, down from 17% in mid-November, and there are only 1.27 Days to Cover. The average Utilization for the rest of the S&P 500 is 7.7%, and for the rest of the North America Software & Services Sector it is 12%.

The graph above shows Yahoo's Lendable Quantity (red line) v. the stock's Quantity on Loan (green line). You will see that the Lendable Quantity took a dramatic decline in early February, from 342m to 240m shares in March, when Beneficial Owners decided to sell their stake. The bid started soon after. Interestingly, around the same time as the Lendable Quantity decreased in Yahoo, there were 180m shares traded, compared to the company average of 45m.

Microsoft's %MCOL is lower than Yahoo's at 0.83%, with Utilization at just 2%. It seems that short sellers are giving these two stocks a wide berth.