Why Sprint Short Interest Is Surging

The comparison is for the two weeks that ended October 15, compared to the prior two weeks.

Sprint has been in the midst of a turnaround for years. Most recently Japan’s Softbank took a controlling position in the company. It wanted a large foothold in America. That has not worked at all. Sprint has fallen from its perennial position as the number three wireless carrier as T-Mobile US Inc. (NYSE: TMUS) has more subscribers, and that has pushed Sprint into the number four position. T-Mobile has been unusually aggressive in its marketing practices and discounts to add customers. In the case of Sprint, the strategy seems to be working.

Sprint also is struggling in a U.S. market in which the count of total wireless customers has matured. American wireless subscribers have reached 320 million, slightly more than the U.S. population. The four large carriers have to take market share from one another to make advances in subscriber count. The task is harder for Sprint because the market is completely dominated by AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ). And as one carrier improves the features of its customer benefits, the others follow. These discounts are bound to have an effect on earnings. Sprint lost money in its most recently reported quarter.

Sprint also has not substantially improved its poor customer service. Several studies, including the carefully followed one by J.D. Power, put Sprint in last place across most U.S. geographic regions.

It is hard to find any path that Sprint might take to move itself from its number four spot among U.S. carriers. Short interest in the company is an indication of that. In addition to the large increase in its short interest, Sprint’s shares sold short as a very high 28.5% of its float.

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