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J Mintzmyer is a CFA candidate (testing Level 2) and investment enthusiast who utilizes Seeking Alpha to provide a free exchange of trading and investment ideas and to provide online visibility for his developing business. J is the Founder and President of Mintzmyer Investments LLC, a financial... More
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  • Extreme Short Float On Angie's List 34 comments
    Feb 14, 2014 6:17 PM | about stocks: ANGI

    Beyond the news of Angie's List (NASDAQ:ANGI) CEO William Oesterle selling 27% of his shares over the past year, several 13G filings have popped up on the EDGAR and they spell a scary story for shorts.

    Combined with short interest on Jan 31 of 18.4M shares, and assuming none of the big holders (top 8) have sold any of their shares, it appears that the practical short float may be as high as 120%!

    I've heard across the board that ANGI shares are impossible to borrow and I've heard of limited anecdotal reports of brokers forcing shorts to cover their shares due to limited supply. If my rudimentary chart below is anywhere close to accurate, and especially if any big players have upped their stake, we could be in for some massive short-term stock manipulation.

    In essence this stock is so heavily shorted that it is physically impossible for the stock to move much lower without one of the 'big names' folding.

    It seems as if Capital Research Global has 'seen the light,' but the rest of the institutions continue to increase their ownership.

    At this point, I'm resigning to the fact that my puts will probably expire worthless. Long-term the company is a $0, and probably under $5 within the next year, but for now it's devolving into a high stakes game to see who blinks first. A few of these big bag holders are going to get burnt extremely badly, but not perhaps before a significant number of shorts are crushed.

    With shorts being forced to cover and the 'big players' upping their stakes almost universally, this one could get really nasty really quickly. In fact the 'smart' trading move might be to load up on $17.50 calls for March. I won't be doing this, but I do have a $22.50/$20 Mar14 call spread play left over as an insurance play against earnings-who knows, it might pay off significantly.

    Ulterior Motives?

    On a side note, I received a message from an anonymous user suggesting that I had 'ulterior motives' due to the fact that I published an article bashing Angie's List while also holding puts ($12.50s and $15s). If anyone has any issues with what I post, please post below in a public forum, don't try to attack me or threaten me in a private message. Also please make sure you leave your full name. If you think there's any misleading information, by all means, feel free to contact the SEC. I'd love it if they looked into this company, maybe they'd find some suspicious insider dealing behavior by the CEO … Perhaps the $10.4M of insider sales while giving (allegedly) misleading statements?

    Trade History

    As often as possible, I post my trades on Seeking Alpha and Twitter within minutes in an effort to be transparent. Here is my recent history on ANGI trades (2014):

    Anyways, best of luck to everyone- it's going to be a wild week out there.

    Disclosure: I am short ANGI.

    Additional disclosure: I am short via Feb14 puts ($15 and $12.50). I also am long bullish call spreads for Mar14 ($22.50/$20).

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Comments (34)
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  • Gettin'Long
    , contributor
    Comments (167) | Send Message
     
    Interesting...so just to clarify, if the longs place buy orders, the shorts will get "bought in" by lending houses and that will create a short squeeze until a significant amount of shorts cover and the longs begin selling again back into the market? Need help with the mechanisms here.

     

    Another good call J, the market was cruel with the result.
    14 Feb, 06:52 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3616) | Send Message
     
    Author’s reply » I'm not sure on the exact technicals of the process, but big institutional holders can give their shares out on 'loan' to shorts.<p class="double"> <... institutions withdraw their shares from 'loanable status,' the accessible float can decline markedly.<p class="double"> <... a small guy like either of us going out an buying say 1k shares, does nothing to reduce the float since our broker (Scottrade, Options House, TD, etc) will continue to loan them out and keep the proceeds. <p class="double"> <... a player like JAT Capital for example, could buy 1M shares and hold onto them without allowing them to be borrowed. This would reduce the short float effectively. <p class="double"> <... anyone buying into the rally creates additional upside pressure (for any stock), but say a short with 200k shares has a stoploss at say $15, if it hits $15, it's going to $15.50, maybe $16 instantly because suddenly you have a buy order for 200k shares initiated "at the market." I think that's what happened with the weird spike on Thursday. We'll probably never know what 'exactly' happened though.<p class="double"> <... it's a very crowded short, as I've mentioned several times previous to this blog post, so the stock price might not respond 'normally' or 'rationally' to events.
    14 Feb, 07:07 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3616) | Send Message
     
    Author’s reply » Wow- hello formatting disaster! Hope you can read that...
    14 Feb, 07:09 PM Reply Like
  • platonicbomb
    , contributor
    Comments (1131) | Send Message
     
    Makes sense. I would guess most of the calls are held by bag holder institutions who will make all the money they want forcing short squeezes. Once enough shorts have lost their shirts and a squeeze is no longer possible, the institutions will ease their way out with 50-70% losses on the stock and 5x-10x returns on the options. That may be the primary reason you see institutions buying stock. It gives them more control over shorts.

     

    I don't think this is illegal. Could be wrong. It's just a long strategy that uses options as well as stock. Dirty but probably legal.

     

    It would be interesting to analyse call purchase volumes and stock purchase volumes to see whether there is a correlation that suggests such a strategy.
    15 Feb, 09:48 AM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3616) | Send Message
     
    Author’s reply » I don't have the data available to find such a thing, as I don't subscribe to any market data platforms beyond what my brokerages offer for free.

     

    Not illegal, unless they conferred in person about the strategy.

     

    Similar thing happened with Volkswagen a few years back.

     

    I'm not alleging that the institutions are in and of themselves 'dirty,' I'm just saying that they haven't sold off at all, and instead have increased their position.

     

    Based on what we've seen fundamentally with ANGI- this defies all logic.
    15 Feb, 12:55 PM Reply Like
  • DBrooks22
    , contributor
    Comments (26) | Send Message
     
    "I'm just saying that they haven't sold off at all, and instead have increased their position."

     

    We won't know if they have sold off until we see updated filings. I see signs of real selling over the last two days. We haven't seen a huge price drop because of short covering and the circuit breaker you mentioned earlier.
    15 Feb, 01:07 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3616) | Send Message
     
    Author’s reply » The volume on Friday was 2.1M, and the volume on Thursday was 6.9M.

     

    If ONLY 1 and the smallest fund up there sold just 50% of their holdings that'd be 1.6M on a pure sell. That type of downward pressure would blow this stock out of the water.

     

    Then again if a major institution wanted to liquidate a multi-million share position, they'd probably try to accomplish it over several weeks at maybe 200k a day or less. We'll see what happens next week, but the volume of 2.1M on Friday was way too low to assume share dumping in my opinion. Just the post-earnings trade flipping is usually around that amount. The average volume is 1.9M...
    15 Feb, 01:34 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3616) | Send Message
     
    Author’s reply » If you want to see what share dumping by an institution looks like, go back and check the first week of October.
    15 Feb, 01:36 PM Reply Like
  • DBrooks22
    , contributor
    Comments (26) | Send Message
     
    Agreed - not dumping, but opportunistic selling. There were 18.4mm shares short, a good portion of which we may assume was going to cover after earnings and move on. That could have easily absorbed 1.6mm shares on Thursday.
    15 Feb, 01:42 PM Reply Like
  • DBrooks22
    , contributor
    Comments (26) | Send Message
     
    If a large fund had 3mm shares for sale at $15, you would never know because only a fraction were purchased on Friday. There is no need to dump and risk cratering the rest of your position when there is a 40% short float.
    15 Feb, 01:50 PM Reply Like
  • Drew R
    , contributor
    Comments (5) | Send Message
     
    I am seeing borrow rates come down on ANGI over at IB.
    14 Feb, 08:48 PM Reply Like
  • Christopher Wallace
    , contributor
    Comments (1045) | Send Message
     
    Classic short squeeze set up. Traders dream.
    14 Feb, 09:03 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3616) | Send Message
     
    Author’s reply » Short-term nightmare for fundamental investors like myself. Really wish I had March, or even better, May puts at the moment.
    14 Feb, 10:37 PM Reply Like
  • DBrooks22
    , contributor
    Comments (26) | Send Message
     
    J - At least one of the big names is selling, per today's market action. If shares can't be borrowed to short, then the share price decline today must be caused by big fund selling. It's not unreasonable or unexpected after horrendous results and perhaps the worst conf call ever. And when those shares are sold to retail, they then become borrowable.
    14 Feb, 09:51 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3616) | Send Message
     
    Author’s reply » 3 thoughts:

     

    1) Some, if not many, of the institutional shares might be up for borrowing. There's no way I could find this out.

     

    2) It's hard to tell if someone is really 'selling' or if traders are just passing the same tiny float of shares back and forth.

     

    3) ANGI is still up 10% from Thursday morning. I don't think any meaningful selling is done. If just one of those 6 institutions sold out their entire stake, I think we'd see $10 in minutes.
    14 Feb, 10:40 PM Reply Like
  • DBrooks22
    , contributor
    Comments (26) | Send Message
     
    I think it would be unreasonable to expect a fund to dump it's entire position in 2 trading days. The key for large sellers is to opportunistically thin their positions, which flows seem to indicate for the last two trading days (other than the last few minutes of trading on Thursday). A 6.5% drop followed by a 6.8% drop in the face of a 40% short float indicates real selling. Watching the tape on Friday, it appears that fund(s) had plenty of shares for sale at $15.
    15 Feb, 01:01 PM Reply Like
  • DBrooks22
    , contributor
    Comments (26) | Send Message
     
    Also, I have not been able to borrow shares from my broker for at least a month, so this is nothing new.
    14 Feb, 09:53 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3616) | Send Message
     
    Author’s reply » I've heard of some people entering shorts back on forth on the Twitter channels (search: $ANGI). I'm talking as recently as yesterday after-hours.

     

    It must depend on the brokerage. I use Scottrade and Options House, but I haven't tried to short ANGI directly... ever. I flagged this one as too dangerous to short directly way back in July 13 without using call protection. If you're going to use call protection, you might as well just buy puts...
    14 Feb, 10:42 PM Reply Like
  • DBrooks22
    , contributor
    Comments (26) | Send Message
     
    If shares are being sold, they should generally become more borrowable.
    15 Feb, 01:01 PM Reply Like
  • tradebr2010
    , contributor
    Comments (198) | Send Message
     
    J,
    I'm glad you hedged your shorts with some calls. I think $ANGI will see $ 20/$ 25 before it sees $ 10, on a classic squeeze!
    I still think the business model is broken and confused. However, financials improved considerably from 2012. Mainly FCF(what I look in tech stocks, not OCF) due to a $ 20M reduction in losses, $ 5M increase in deferred revenue, and $ 5M/6M in window dressing(stock compensation, increase in liabilities).
    If this will reflect on the business for the remainder of 2014, we're yet to see. I think as you said before, it will depend on growing the subscriber base and marketing expenses.
    15 Feb, 09:16 AM Reply Like
  • tradebr2010
    , contributor
    Comments (198) | Send Message
     
    BTW, I can attest to the honesty on your postings and full disclosure. After all, as a CFA candidate, you need to abide by some serious code of ethics.

     

    Further, if you are stating an opinion, it does not mean that you will influence investors to do anything...And, if anyone other than seasoned traders, invest without due diligence is not your concern!
    Best,
    Marco
    15 Feb, 09:23 AM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3616) | Send Message
     
    Author’s reply » Thanks for the comments Marco. The CFA is a very serious program and another reason why I don't try to flip options off articles. I'm sure some do, I don't think there's anything illegal about it, but it's not ethical or sustainable in my view.

     

    I've only received one direct hit on ANGI, compared to 4-5 threats on my FRO article from late 2011 and multiple threats/insults on my DCIX article from February 2013. Then again, this article was reflexive to bad news/drop, the other articles were released in front of 10 and 20% drops respectively.
    15 Feb, 01:00 PM Reply Like
  • Thomas S Hunter
    , contributor
    Comments (15) | Send Message
     
    J-

     

    I don't think anyone is seriously doubting your motives or transparency. Haters gonna hate et al etc etc. Compared to others on SA, I think you are very transparent with your positions and view points. Don't let it bring you down.

     

    I am usually hesitant to read too much into insider sales because of the difficulty associated with reading into people's personal finance motivations. On the other hand, when you have the single largest insider selling 27.6% of his shares and the other co-founder selling 4% of her shares (the "Angie" in Angie's List no less!) in a given year that points to management seeing a high point in the stock and selling while the price is attractive.

     

    I am interested to know what JAT Capital and Capital Research Global see in this stock other than a short-squeeze trading opportunity as mentioned by others above.

     

    Looking forward to your future coverage on this "quadruple-lindy into a belly flop" of a stock.
    15 Feb, 12:28 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3616) | Send Message
     
    Author’s reply » I think JAT is looking for a quick momentum 2-3 bagger. If you look up John Thaler you'll see he's all over the place. Huge risk taker that relies on momentum over fundamentals.

     

    I think he bought in partially on the story, but mostly on the 'oversold' appearance of the equity. After the conference call, everything is riding on the latter.

     

    These funds won't survive Q1-14, thus May strikes are probably the place to be.
    15 Feb, 01:03 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3314) | Send Message
     
    Looks not much different from MYGN which has risen about 50% in a few weeks, just after I identified the possibility on several occasions on stocktalks.

     

    http://bit.ly/ypvJ7n

     

    But ANGI is fundamentally a much lower grade company.
    Will be interesting to watch.
    15 Feb, 12:44 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3616) | Send Message
     
    Author’s reply » I think the ESI squeeze is interesting as well.

     

    The HUGE short interest didn't stop it from plunging 30%, but they quickly recovered on a strong dead cat bounce...
    15 Feb, 01:04 PM Reply Like
  • DBrooks22
    , contributor
    Comments (26) | Send Message
     
    J - Aren't these recent filings all showing holdings as of Dec 31st, 2013? At first blush, your article above makes it sound like big funds are adding to their positions after earnings.
    15 Feb, 01:57 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3616) | Send Message
     
    Author’s reply » Yes, that's the best information you can get unless a buyer passes the 5% threshold of ownership like what happened with JAT Capital.
    15 Feb, 02:16 PM Reply Like
  • DBrooks22
    , contributor
    Comments (26) | Send Message
     
    Thanks, just wanted to clarify for your readers. Some may be confused.
    15 Feb, 02:30 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3616) | Send Message
     
    Author’s reply » No worries, but to clarify the clarification, some of the filings (JAT) are newer.
    15 Feb, 02:36 PM Reply Like
  • Nicholas Anderson
    , contributor
    Comments (228) | Send Message
     
    jay if you're right about this you just made the call of the year! when all the contributors vote for bragging rights this is it right here!
    16 Feb, 03:28 AM Reply Like
  • Sophocles Sophocleous
    , contributor
    Comments (143) | Send Message
     
    Check your numbers.
    Float: 50.37m
    Short: 18.40m
    Short (% of float): 55% (not 120%)
    You added insiders to short and then divided by float.
    17 Feb, 04:37 AM Reply Like
  • J Mintzmyer
    , contributor
    Comments (3616) | Send Message
     
    Author’s reply » Sophocles,

     

    We all (or most of us) know the traditional % of float that is short.

     

    My point was that markedly few institutions control a massive portion of the shares. If these shares were not available to borrow and/or were not expected to be sold and/or the trend of these institutions increasing their share of ownership continues, then shorts (such as myself) are in extremely hot water.

     

    55% in itself is a massive number, but the underlying ownership picture is even more scary.
    17 Feb, 10:50 AM Reply Like
  • Gilgamesh_
    , contributor
    Comments (4) | Send Message
     
    J. : You've provided several quality investigative financial analysis posts to date regarding ANGI. Much obliged. The shareholder summary you provided is helpful, too. By the way, Insider Monkey provides some high level information including Puts and Calls (for example, Peak6 Capital seems to have some sort of Put/Call strategy on ANGI). Here's the link, but one can just go to IM's page and enter ANGI to find the summaries:
    http://bit.ly/1dUa2Hq
    3 Mar, 01:34 PM Reply Like
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