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Frontier Communications: Short Interest Report On Common (FTR) And Preferred (FTRPR) Shares

|About: Frontier Communications Corporation (FTR)

Summary

Frontier Communications executed the long-awaited reverse split, culminating a 1H'17 that saw Frontier common plunge 75% YTD

The most recent report on June 26th (settlement June 15th) showed short interest of 25% of outstanding shares at 19,729,217 (reverse split shares)

Short Interest Charts shown previously have been updated to reflect short interest data reported today (June 30 settlement) after the close, modifying the charts to reflect the reverse split

Short interest for Frontier common (FTR) jumped by more than 10% while the Frontier preferred short interest declined slightly

This is the latest in a series of reports on the short interest of Frontier Communications Common (FTR) and Preferred (NASDAQ:FTRPR) Shares.  

Complicating this report is the 15:1 reverse split executed by Frontier Communications as of the open on July 10th, 2017. The charts that had previously been used have been modified to reflect the 15:1 split in the data extending back to May 2016 to provide a common reference point for the existing short data.  Charts going forward will provide the data in the "new", reverse-split form retroactively to provide context for the current data, even if they were not present in the "new" form at that time.

In an earlier article, the author had offered a thesis that short interest volumes were tracking towards a volume on June 29th, 2018 of just above the number of shares to be created upon the conversion of 19,250K Preferred Shares into 385,000K "old", pre-reverse-split shares or 25,667K "new", reverse-split shares. In an earlier article and again in two blog posts, short interest had tracked increases along a least squares line inexorably towards a point of 405,000K shares, about 20,000K "old" shares above the number to be created in conversion. At the end of May, the chart looked like this:

May SI As you can see, short interest seemed to be moving to converge with the shares to be created through conversion of the Preferred Shares or a bit above that level.

As of the most recent report for June 15th settlement, issued June 26th, the chart looked like this, with the new point (highlighted in red) added to the original least squares line.  You will note that I have converted the basis of the chart to the "new", reverse-split share count:

Mid June Again, this chart shows that the short interest appears to be following the previously established trend, even if the latest point is a bit above the line.

Short interest for Frontier Communications Common Shares as of June 30th settlement was reported after the close of the market today.  Short interest rose by 10.5% to a new high 21,816,375 level from 19,729,217 shares as of June 15th settlement, with the new chart provided here:

End June Clearly, the trend, if it was a trend, appears to have been broken.  Short interest has moved well above the trend line to new, high levels (record high levels as far as I can see) as of the end of June. Indeed, if it increases at this same rate through July as it did through June, the resulting calculated short interest (25,614,011 shares) will essentially equal the entire number of shares expected to be created upon the conversion of the Preferred Shares (25,666,667) in June 2018. If it continues to increase at the pace of the last two weeks, one would calculate a short interest of 26,676,452 shares, 34% of current outstanding shares and exceeding the shares created at conversion by 1MM. Also worth noting that the current short interest represents 27.8% of the current total of outstanding shares.

Given this break in trend, I reformatted the trendline to be updated as additional short interest data was added instead of adding new points to the existing line to see if they were tracking the old trend.  In the chart above, only the existing, blue points were used to determine the least squares line. Now, that trend appears to have been broken, I wanted to see the new number of short interest towards which the trend will converge, using this chart:

End June New Trend The newly established least squares line now indicates that, if the current trend continued, there will exist short interests of 28,000K shares on the day of conversion, 2,333K shares above the total to be created.

Given the precipitous decline in share price since the beginning of July, especially within the past three days, it would not surprise me to see the short interest ratchet up substantially higher from the end of June level.  Short interests as of July 14th settlement will be reported on July 25th, at which time we will have an opportunity to see if FTR short interest has indeed "ripped" higher.

Less dramatically, short interest for FTRPR declined to 50,248 from 53,149 for mid-June settlement.

Disclosure: I am/we are long FTR, FTRPR.