Stocks: (YHOO)(GOOG)(NWS)
You don’t have to be a genius to be short Yahoo!. But short interrest in the company grew 6.4 million shares to 84.3 million. And, the short position has been up six of the last eight months.
Even at $27, shorts are wiling to bet the stock will go lower. It traded at $43 in January, so that is quite a gamble. At least statistically
It hardly helps that one of Yahoo!’s managers came out with a manefesto suggesting that 20% of the companies employees should be fired and that the company had little focus. And, a poor Q3 made matters worse. The perception on Wall St. is that Google’s purchase of YouTube and News Corp’s acquistion of MySpace were smart moves. Even if the two companies have not figured out how to make money from their new jewels.
But, Merrill Lynch recently upgraded the stock. The theory is simple. With the stock down so much from its recent high, the bad news and anticipation of slower growth at Yahoo! are priced into the stock.
Which leaves an interesting riddle. If most of the downside is priced in, what if Yahoo! does something right? Surprises on earnings? Gets strong traffice for its new search marketing platform? Makes an acquisition that Wall St. likes.
Well, a lot of shorts could get burned.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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