- Snap turned in a disastrous third-quarter earnings report that saw its stock plummet as much as 22% in post-market trading.
- Short sellers pared positions in the weeks leading up to earnings, costing themselves potentially huge profits that would’ve resulted from the stock drop.
- Even Tencent’s acquisition of a 10% stake in Snap couldn’t rescue the company’s shares, which are still trading down about 15% in early trading on Wednesday.
Snap may be the most shorted app-based company in the world, but traders betting on a decline in the stock just took their foot off the gas at exactly the wrong time.
They covered $115 million of their positions in the week leading up to Snap’s disastrous earnings report, and trimmed $278 million from a year-to-date high reached in mid-October, according to data compiled by financial analytics firm S3 Partners.
As Snap’s stock plummeted as much as 22% in post-market trading after reporting smaller-than-expected user growth and a huge drop in advertising rates, those short sellers who exited their positions missed out on a potentially huge windfall.
While Snap bears certainly reaped at least some healthy profits from the decline — after all, S3 Partners says that $1.7 billion of the company’s shares are still held short — there’s no denying that many will be lamenting the missed opportunity.
Their short covering was nearly rewarded in early-morning trading as Chinese investment holding company Tencent made a 10% investment in Snap, according to a CNBC report. The news temporarily erased most of the loss almost immediately, before more sellers stepped in and pushed shares back down. Snap was trading down about 15% in pre-market trading as of 8:06 a.m. ET.
The fact that short sellers pared their positions heading Read More Here