Short Sellers and Constellation Energy

Yesterday's release of short interest as of mid-September showed that overall levels of short selling remained nearly unchanged from the end of August.  Given the SEC rule changes announced since the middle of September, you can expect these figures to show a big change when the figures for the end of the month are released. 

One stock that did show a large change, however, was Constellation Energy (CEG).  From the end of August through the middle of September, short interest in the stock increased by over 400% from 1.4% to over 6% of the stock's float.  As shown in the chart below, while the stock of CEG has been in a downtrend all year, it started to crater on September 15th, right after short interest spiked. 

Following Lehman's bankruptcy filing and Bank of America's takeover of Merrill, CEG fell from over $58 down to under $26 in a week.  The reason for the decline was based on the view that the company would have trouble finding a Wall Street partner for its wholesale energy trading business.  While the increase in short interest is not necessarily an indication of any illegal activity, somebody did a very good job at connecting the dots, and it shows why investors should always monitor these statistics in stocks they own.

click to enlarge

Comments

[pdd:]

an area I would love to hear your thoughts on are reverse cv bonds. seems when they appear the stocks drop dramactly.

2008 Sep 25 04:37 PM

[pseudo?:]

Stop all of these contracts since they are wrong for all long investors. They will ultimately kill stock trading altogether.

2008 Sep 26 12:43 PM