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GoPro's troubles worsened on Wednesday when it forecast
current-quarter revenue well below analysts' estimates, adding
to a string of disappointments by a company that a year ago was
a Wall Street favorite.
Its stock dropped 7.5 percent on Thursday to $9.88.
Short interest in GoPro increased to 25.7 percent of its
outstanding shares in mid-January from 23.9 percent in
mid-December, according to Nasdaq data.
"All the monster hedge funds have their positions set. Now it's
everyone else scrambling to pick up what they can," said Ihor
Dusaniwsky, managing director of research at S3 Partners, which
sells securities lending data and advises investors.
With the supply of shares for borrowing already low, Dusaniwsky
warned that he is seeing early signs of institutional
shareholders recalling and selling shares they had previously
loaned to short sellers.
Short sellers borrow shares and then sell them, hoping to buy
them back at a lower price to make a profit. If the lender
unexpectedly recalls those shares, the short seller must find a
new lender or, if that is not possible, buy the shares back and
potentially lose money.
"We're getting to that point right now with GoPro," Dusaniwsky
said.
GoPro's stock has fallen 84 percent from record highs in August.
It recently traded at 17 times expected earnings, a bit above
rival Garmin, at 15 times earnings.
(Reporting by Noel Randewich)
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