Why Rite Aid Short Interest Continues to Climb Ahead of Merger With Albertsons

Retail

Published: April 11, 2018 9:10 am

Last Updated: January 12, 2020 1:33 am

As Rite Aid Corp. (NYSE: RAD) prepares to report quarterly results on Thursday, short sellers are placing their bets that those results will encourage even more shareholders to get out of the stock ahead of the planned merger with privately held Albertsons.

Analysts are expecting a net loss of $0.01 per share on $5.57 billion in revenue. The consensus price target is $2.08, and the 52-week range is $1.38 to $4.87. Shares closed Tuesday at $1.65, up about 2.5% (four cents) on the day. Since the proposed merger was announced on February 20, Rite Aid shares have dropped 25%.

Partly that’s due to the completion of the sale of more than 1,900 Rite Aid stores to Walgreens Boots Alliance Inc. (NASDAQ: WBA), leaving Rite Aid a lot smaller than it was a year ago when Walgreens offered to buy the company for $6.50 a share. That deal was later abandoned when antitrust regulators indicated it would not be approved.

At the end of the two-week short interest reporting period ended March 29, nearly 164 million Rite Aid shares were short. That represents about 15.5% of the total float and is almost 12% higher than short interest on March 15.

Short sellers appear to be betting that investors who still hold Rite Aid shares will recognize that the deal with Albertsons, which values Rite Aid stock at $0.183 in cash per share plus one share of Albertsons stock, is very likely worth less than $1.60. Given that Albertsons is not publicly traded and no one knows for sure what a share of its stock is really worth, this may be a good bet.

24/7 Wall St.
The 6 Most Shorted Nasdaq Stocks

Are You Still Paying With a Debit Card?

The average American spends $17,274 on debit cards a year, and it’s a HUGE mistake. First, debit cards don’t have the same fraud protections as credit cards. Once your money is gone, it’s gone. But more importantly you can actually get something back from this spending every time you swipe.

Issuers are handing out wild bonuses right now. With some you can earn up to 5% back on every purchase. That’s like getting a 5% discount on everything you buy!

Our top pick is kind of hard to imagine. Not only does it pay up to 5% back, it also includes a $200 cash back reward in the first six months, a 0% intro APR, and…. $0 annual fee. It’s quite literally free money for any one that uses a card regularly. Click here to learn more!

Flywheel Publishing has partnered with CardRatings to provide coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.