Short selling data can help active investors avoid large losses. Short sellers tend to do their research. If they’re targeting 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 Support.com Inc (SPRT:US). Support.com is a technical support company that serves businesses and consumers through a network of home-based employees. Operating in eight countries, it serves businesses in a range of industries, including the media and communication, healthcare, retail, and technology industries. It is listed on the NASDAQ Capital Market and currently has a market capitalization of $532 million.
Support.com: Short Selling Data
Looking at the short selling data on Support.com, we see a number of red flags.
The first is that short interest is very high. Our data shows that at present, 6.7 million shares are on loan. That represents around 39% of the company’s free float. The fact that short interest is so high is concerning as it suggests that short sellers are very confident the stock is set to fall.
The second is that the cost to borrow stock is extremely high at 151.2%. This indicates that demand for the stock from short sellers is very elevated right now. The Borrowing Activity Rating (BAR) of 10 confirms that activity on the short side is intense at present. BAR includes inputs from outstanding loan fees, new loan fees, new loan volume, and utilization rates and a rating of 10 indicates a high demand to short the stock.
Our data shows that short selling transactions here have been steadily increasing since March, when Support.com announced a merger with Bitcoin miner Greenidge Generation Holdings Inc. Greenidge is a holding company that includes Greenidge Generation LLC – a vertically integrated Bitcoin mining and power generation facility in Upstate New York. Under the terms of the merger, Support.com is expected to provide Greenidge with an estimated $33 million of additional cash. Upon completion of the merger, Support.com stockholders and option holders will collectively own around 8% of the combined company’s common stock while Greenidge stockholders will own approximately 92%. Short sellers clearly don’t see the appeal of this merger.
While institutions are bearish here, retail traders are not and recently they have piled into the stock, forcing a huge short squeeze. In August, the stock spiked up to near $60, after starting the month near $8.
While Support.com stock could potentially keep rising if retail traders continue to buy, history suggests that meme stocks eventually feel the pull of gravity and end up trading closer in line with their underlying fundamentals. It appears that this could already be happening. This month, the stock has fallen back to $22.
Given that short interest remains elevated, we think caution is warranted towards the stock. The data suggests that short sellers continue to see significant downside risk here.