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One of the most profitable shorts of 2022 in Carvana (NYSE:CVNA) popped on Wednesday, but one expert says it might not be short covering driving the rally.
Ihor Dusaniwsky, Managing Director of Predictive Analytics at S3 Partners, told Seeking Alpha that it would likely take a much bigger rise in the share price for short-sellers to close positions. According to his data, over 47% of the stock’s float is held short, only trailing Bed Bath & beyond (BBBY) and Silvergate (SI) in that regard.
In the past year, the bets against the stock have paid off in a big way. Per Dusaniwsky’s calculations, shorts notched over $4.3B in mark-to-market gains in 2022. Dusaniwsky also pointed to data that suggests shorts are not pulling off of their bets quite yet as only 1.4M shares have been bought-to-cover in the past month, amounting to a 3.1% decrease in total shares shorted.
“We are seeing CVNA short sellers give up a sliver of their 2022 mark-to-market gains and are down $29.6M in January mark-to-market losses…this includes down $43.3M on today’s 22.2% spike in its stock price,” he told Seeking Alpha. “With CVNA shorts up over $4.3B in 2022 mark-to-market profits a one-day loss of $43M would not be the trigger for a wholesale short squeeze. While some shorts may be trimming or exiting their positions the vast majority are standing pat and looking for CVNA’s stock price to stay in the $4 to $6 range we’ve seen for most of December\January.”
Shares of the Arizona-based auto retailer have fallen over 97% in the past year.
Read more on other highly-shorted stocks surging on Wednesday.
