Short Interest Observations

Includes: AMZN, BB, CRM, NOK
by: Paulo Santos

In the last couple of months, a few stocks have exhibited interesting behavior in their short interest numbers. Some are interesting because of what they did, some because of what they didn't. This article will cover 4 of those stocks: (NASDAQ:AMZN), (NYSE:CRM), Nokia (NYSE:NOK) and Research in Motion (RIMM). (Source for short interest data:'s short interest is amazing for a simple reason: it's the opposite of what one would expect it to be. It's small. At less than 8.7 million shares,'s short interest comes to just 1.9% of its diluted shares (460 million). This can't but surprise, when one considers that even Apple (NASDAQ:AAPL) has 2.2% of its shares sold short.

It's even more surprising, though, when one considers how's earnings have surprisingly imploded against all estimates during the last 2 years, taking this $115 billion market cap behemoth to a 3000 TTM P/E and a 143 forward 2013 P/E.

Over the last year's short interest ended up mostly unchanged, even if it had a peak of a further 2.5 million short shares during the March-May period. But again, this ought to be put in perspective: during 2010 as the Fed was starting its QE2 printing campaign,'s short interest stood at double its present levels. So basically's short interest levels translate into a complete throwing of the towel by the short side.

This throwing of the towel is both evident from's short interest having halved since late 2010, and from its absolute level, which at 1.9% of the outstanding shares, places it even beloe Apple's.'s short interest is somewhat different from Although it isn't much higher than one year ago, at 15.9 million shares now versus 14.9 million one year ago, CRM's short interest has:

  • Gotten considerably higher in the last couple of months, as Salesforce tested and broke through its highs. Short interest went up 3.2 million shares from the end of September to the end of November;
  • Remained very high. 11.2% of 142.2 million diluted shares are sold short at this point.

This can mean two things. One is that's shorts have not thrown in the towel and might still have fight in them. The other is that has a convert that's still outstanding, and sometimes those are arbitraged by their holders, leading to higher short interest than would otherwise be observed. The convert is for $575 million with a $85.36 initial conversion price. Given that it's in the money, if some holders are hedging it such would mean a high hedging ratio - so $575 million could easily answer for up to 6 million shares being shorted to compensate, or upwards of 1/3 of the existing short interest. shares something else with It's a stock held on faith and hope that in the future earnings will be much different than in the recent past.'s GAAP earnings have been on a steady downward trend much like's, and have now turned consistently negative.


Nokia presents something weird which might have an unexpected explanation. It presents a large jump in short interest, both over the last year, with short interest having gone from 140 million shares to 295 million presently, and over the last few months, with short interest going from 150-210 million shares over the summer months to 295 million presently. Most of this increase was done by the middle of September, as short interest hit 315 million shares back then.

What happened from the middle of July to the middle of September? Nokia put in its bottom and proceeded to almost double in that timeframe. It would seem that the short interest was built during this initial climb, and has remained rather stable, with a slow drift down, since then.

The rather large implied short interest, at around 8.1% of outstanding shares not counting those that might be shorted in Finland and elsewhere, could embolden speculators to think that a significant short squeeze might be possible here. However, it would seem strange for short-side investors to get so aggressive against Nokia after it put in a multi-year bottom and was now seeing some chance of recovery. So what other explanation might there be?

The other explanation is that Nokia doesn't just trade in the U.S. it trades elsewhere, it trades in Finland. Sometimes that generates arbitrage between the markets, and if buying interest is particularly powerful in the U.S., it might lead to some arbitrageurs selling the stock short in the U.S. and buying it elsewhere. Given the recent huge increase in short interest and how it would seem to speculative to short Nokia massively here, this explanation seems most likely.

Research in Motion

Research in Motion is analogous to Nokia, but even more radical. Its short interest has climbed 71 million shares over the last year, from 42 million to 113 million shares, and is also up strongly both recently and since the summer months. It's also seemingly on a steady course higher.

Even more than Nokia, Research in Motion's short interest is already massive, at around 22% of the diluted shares. It would seem that no matter what the explanation is, a short squeeze seems possible and might already be happening.

It should be noted that the same explanation which stands for Nokia, can also be applied to RIMM. RIMM shares are originally Canadian and there might be a measure of arbitrage bumping up the short interest. This would also mean that demand for the shares is once again being born in the U.S.

Anyway, the sheer size of the short interest position seems large enough that it's feeding the share price through a squeeze. The sheer size of the short interest position might also mean that the short interest hasn't thrown in the towel on this particular position. Much of RIMM's recovery is obviously based upon hope that the Blackberry 10 OS might rekindle its market share, so it's mostly faith-based in nature.


A look into the evolution of the short interest of several stocks shows us the diversity of motives and implications present in the market. From's shorts having clearly thrown in the towel, to RIMM's aggressive short squeeze of strong-handed shorts everything seems possible.

At this point, seems the safest short given the fundamental earnings/estimates dynamics, valuation, market capitalization, lack of large short interest and presence of multiple threats to its business model.

Disclosure: I am short AMZN. 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.