The FT reported this morning that Sears (SHLD) the US’ fourth-largest retailer, has announced a Q3 earning fall of 99%.
Short interest has certainly risen in Sears, as you can see from this graph of the last six months’ borrowing activity. The red line documents the % Market Cap on Loan (%MCOL), which in simple terms is the percentage of the entire Market Cap that is out on loan. It has increased significantly since late June, where the %MCOL was around 2% to today’s figure of 9.31%. This graph shows an inverse correlation – where the share price (green line) in late July crosses over with the %MCOL.
The second graph shows Utilisation, in other words, the percentage of what is available to borrow from the available shares. You can see that again, there is an inverse correlation with between Utilisation and share price.
Finally, can the news get any worse for this company? If not, stand by for some short covering.