BlackBerry's share price has more than doubled over the last six months
as buzz around its new smartphones has boosted investor confidence, but
some traders are betting big that talk of a turnaround is over-hyped.
data released on Tuesday shows that short interest in the stock is at
record levels and has more than doubled over the course of the last
With BlackBerry due to report quarterly results in two days,
giving investors their first official clues on demand for its new Z10 (Review I Pictures)
touchscreen device, that buildup of bearish bets could send the stock
price surging if the company delivers a positive surprise.
a one-time pioneer in the smartphone market, hopes the device - powered
by its new BlackBerry 10 (Review) operating system and other devices soon to
follow will turn its fortunes around and help it to win back market
share in an ultra-competitive sector. But many traders are clearly
Short interest in BlackBerry's Nasdaq-listed stock
has risen to more than 155 million shares, up from 136.5 million shares a
month ago and 60 million at this time last year.
Traders who sell
securities "short" borrow shares and then sell them in the hope that
the price will fall, so they can buy them back more cheaply, return them
to the lender and pocket the difference.
Markit, a financial
information services company, said in a report last week that positive
reviews around the Z10 have thus far failed to impress short sellers,
with demand to borrow shares in BlackBerry hovering at record levels.
firm, which collects data from custodian banks that run lending
programs on behalf of investors who sometimes put their holdings into
such programs, notes that roughly three-quarters of the BlackBerry
shares that can be borrowed are already out on loan, meaning that it
would be difficult and expensive to short any more of the company's
shares at this time.
The number of short positions indicates that
over 30 percent of BlackBerry's free float is currently being shorted,
up from about 11 percent at this time last year.
The bearish data
comes close on the heels of analysts' and media reports that the Z10
device had a rather muted launch in the United States last week.
Short squeeze eyed
is hoping that the Z10 and other new devices powered by its new
operating system will help it to regain ground ceded to rivals such as
Apple Inc's iPhone, as well as Samsung Electronics Co's Galaxy line and
other devices powered by Google Inc's market-leading Android operating
BlackBerry's results this week will, however, only provide
investors with limited insight on demand for the Z10, which was on sale
during just the final month of the latest quarter. And although the Z10
is now available in more than 25 countries, it initially went on sale
only in the United Kingdom and Canada.
BlackBerry's volatile stock
is nevertheless likely to swing wildly following the results on
Thursday, as analysts and investors read into the numbers and
extrapolate broader sales trends for the new device across the rest of
The company's stock, which closed at $14.46 on Tuesday
on the Nasdaq, has already dropped roughly 10 percent since Friday after
the reports of the Z10's lackluster U.S. launch.
pullback in the stock ahead of results, however, may not be all bad news
for those investors hoping for a big turnaround in the company's
fortunes, as any positive outlook or data points from the company on
Thursday would raise the prospects of a short squeeze in the stock.
that scenario, bearish traders that sold the stock short would be
forced to buy shares to avoid big losses on their positions - something
that only serves to work against short sellers and push a stock higher.
Jackson, the founder and managing partner of Ironfire Capital LLC,
believes the size of the short position in the stock may serve as a big
catalyst for BlackBerry's share price, if the company provides investors
with an upbeat forecast.
"Even if they report a so-so quarter if
they provide robust guidance for the current quarter, that could really
light a fire under the stock," said Jackson, whose firm owns shares in
© Thomson Reuters 2013