Short Selling

Short Selling Report: Oatly AB (OTLY:US)

featured image
Oatly AB
(OTLY:US)
12 months:
N/A
Activity:
Bearish
Pattern:
Rising short interest
News:
Report from Spruce Point Capital Management
Oatly AB
(OTLY:US)
12 months:
N/A
Activity:
Bearish
Pattern:
Rising short interest
News:
Report from Spruce Point Capital Management

If a stock has a high level of short interest, it can pay to approach the security with caution. Short sellers tend to do their research. If they’re shorting a stock, there’s usually a good reason they are doing so.

In this report, we are going to discuss the short interest data on Oatly AB (OTLY:US). Oatly is a Swedish company that manufactures oat milk. Founded in 1994, it is currently the world’s largest oat milk business. Oatly listed on the NASDAQ earlier this year through an Initial Public Offering (IPO). At present, the company has a market capitalization of $12.2 billion.

Oatly: Short Interest Data

Looking at the short selling data on Oatly, we can see that short interest has risen significantly recently.

Starting with data from NASDAQ, we can see that short interest increased substantially between 15 June and 30 June. The jump from 3,573,228 shares short on 15 June to 6,107,434 shares short on 30 June represents an increase of 71%.

Source: Nasdaq.Com

Turning to FINRA data, we can see that short volume spiked on 14 July. In total, 1,868,642 shares were shorted on 14 July. That compares to a figure of 473,652 shares on 15 June.

Data: FINRA.Org

After this increase in short interest, the overall level of short interest at Oatly is now quite high. Our Alpha Terminal – which uses short selling data from Astec – tells us that, at present, 7.4 million Oatly shares are on loan. That represents roughly 11.5% of the free float.

This high level of short interest is a concern, in our view. Research shows that heavily-shorted stocks tend to underperform. Research has also shown that unusually large increases in short interest tend to be followed by a period of negative abnormal returns.

Spruce Point’s Report on Oatly

It’s worth noting that on 14 July, short seller Spruce Point Capital Management published a report on Oatly.

In its report, Spruce Point states that it has concerns in relation to Oatly’s:

  • Market share: the short seller believes that the oat milk company is losing market share in the US and Sweden as a result of low barriers to entry and a lack of competitive advantage.
  • Accounting: it believes Oatly has overstated its revenue and gross margin.
  • Governance: it claims both Oatly’s CFO and Audit Chair have obscured their roles in prior corporate accounting scandals.
  • Profitability: it believes Oatly will “never achieve profitability.”
  • Valuation: Spruce Point points out that Oatly’s valuation of $12 billion represents 57% of the 2025 total projected non-dairy milk market. It believes this valuation is “unsustainable.”

In light of this report, we see the high level of short interest here as a bearish indicator. It indicates that short sellers see the stock as overvalued and that they expect it to fall from here.

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