Short selling data can be a valuable risk management tool. Short sellers tend to be advanced, high-conviction traders. If they’re shorting a stock, there’s usually a good reason they are doing so.
In this report, we are going to look at the short selling data on Fisker Inc (FSR:US). Fisker is an American electric vehicle (EV) company that is based in California and led by Henrik Fisker, who previously led the development of BMW’s Z8 and also designed Aston Martin’s DB9. Its flagship model is the ‘Ocean’, an all-electric SUV designed to go head-to-head with Tesla’s Model Y. The company is listed on the New York Stock Exchange and currently has a market capitalization of $3.04 billion.
Fisker Inc: Short Selling Data
Looking at the short selling data on Fisker, we see a couple of things that concern us. The first is that short interest is worryingly high. At present, 70.26 million FSR shares are on loan. That represents approximately 49.7% of the free float.
The second is that short interest has risen significantly recently. When we last looked at the data on Fisker, in November last year, there were 54.4 million shares on loan and utilization – a measure of short side demand – was 81.4%. However, today, the number of shares on loan is 24% higher, and utilization stands at 100%. So, interest from short sellers has increased, despite the fact that the share price has nearly halved since our last report.
Why Are Short Sellers Targeting Fisker?
As for why the short sellers are ramping up their downside bets here, it’s probably related to supply chain and cost issues. Recently, a number of EV manufacturers have had to reduce their production targets due to the fact they have been unable to source components and costs for some materials have sky-rocketed. For example, in mid-March, rival Rivian halved its production forecast, pointing to struggles with raw material prices and supply chain constraints. Rivian’s CEO has raised warnings about a potential EV battery shortage that could have a dramatic impact on the industry.
Alternatively, it could be related to the fact that Fisker is unprofitable and likely to need further funding in the years ahead. With interest rates rising rapidly in the US, the cost of capital is set to increase substantially.
Of course, it could simply be related to the valuation. At present, Fisker has a market cap of $3.5 billion yet it’s only forecast to generate sales of $83 million this year. That means the stock has a forward-looking price-to-sales ratio of about 42, which is very high.
Whatever it is the short sellers have seen here, we think caution is warranted towards the stock. The high level of short interest indicates that sophisticated investors see downside risk.