BlackBerry Short Sellers Are Still Mostly In The Red

| About: BlackBerry Ltd. (BBRY)

Lady space, you better wake up fast
Countdown is comin' on
Take a rocket ride
The gravity that used to hold you down
Just don't exist no more
Take a rocket ride

(*Lyrics from Rocket Ride - KISS, 1977)

Another NASDAQ short interest report and another new all-time high for the number of BlackBerry (NASDAQ:BBRY) shares that have been sold short. I mean we are so used to seeing higher numbers for BlackBerry shares sold short that if we see a decrease in short interest, we will probably be astonished.

As the data from NASDAQ shows, as of 4/15/2013, the total number of BlackBerry shares that have been shorted number 165.3 million. That's up by about 10 million from the previous settlement date. The total short interest in BlackBerry shares currently stands at around 32% of total shares outstanding.

The interesting thing about BlackBerry short sellers is that they are going against the trend. I have the utmost respect for long-term strategic short sellers, but only when they go with the trend.

Let me explain what I mean.

(Click to enlarge)

The first chart shows the short interest in BlackBerry shares from 6/29/2012. The chart below that shows BlackBerry's stock chart (data from Yahoo) during the same period. In other words both charts start from 6/29/2012 and end today.

As you can see, with the exception of shares shorted in mid-January, the beginning of February and just a pinch towards the end of March, all other shares that have been shorted in BlackBerry during this time period are in the red.

And when I mean in the red, I mean it literally. The lion's share of BlackBerry shares that have been shorted as of June 2012 are losing money. In fact the shares that were shorted prior to 2013 are bleeding very bad (assuming of course that they have not covered).

So what will all these short sellers do if the stock goes to $20? I have no idea, but if history is any guide, we will probably see even more short interest in the stock. And what exactly are all these short sellers expecting to gain, when some of the biggest Wall Street firms have a price target for BlackBerry shares even above $20? I really don't know.

What I do know is this: any attempt to cover these shares will push prices much higher. And as far as I'm concerned, that can happen any day for any reason -- or even for no reason at all -- with or without a catalyst.

So while short sellers can continue to short the stock to their heart's delight, my take is that they will continue to bleed and be in the red, until either their broker calls them up to cover margin or forcefully covers for them.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

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