Short Report: Bearish bets on Comstock elevated as short-squeeze risk grows

Welcome to this week’s installment of “The Short Interest Report” – The Fly’s weekly recap of short interest trends among some of the most widely followed high-short-float stocks. Using the data from our partner Ortex.com, which utilizes the latest information from stock lenders to estimate short interest changes for thousands of publicly traded companies, this report will screen for some of biggest changes in short interest as a percentage of free float and days-to-cover ratios while also considering the short interest data on some of the more volatile and heavier-traded names of the week. Based on the availability of data from Ortex, the report tracks the trading period that covers prior Friday through Thursday of this week, excluding holidays. As a basis of comparison for stocks discussed below, the S&P 500 index was up 2.1%, the Nasdaq Composite was up 2.5%, the Russell 2000 index was up 5.8%, the Russell 2000 Growth ETF (IWO) was up 5.6%, and the Russell 2000 Value ETF (IWN) was up 6.0% in the five-day trading session range through September 19.

SHORT INTEREST GAINERS

• High level of bearish positioning in a Texas-based oil and natural gas producer, Comstock Resources (CRK), was spotlighted by an impactful research note from KeyBanc heading into the weekend and warrants a mention in this column. Ortex-reported short interest as a percentage of free float in Comstock was up less than a percentage point at 37.5% this week, but short positioning on the stock remains elevated on a relative basis as it was below 25% for years prior to this April’s jump. As the KeyBanc note discusses, the high bearish activity has made the name a candidate for a short-squeeze should Jerry Jones – whose Dallas Cowboys is reportedly valued at $11B and whose Arkoma Drilling has already aggressively purchased over $116M in Comstock stock in August – decide to take the company private, opportunistically taking advantage of the NFL decision to allow private equity investments in professional teams to unlock liquidity. Shares of Comstock were up about 4% in the five-day period covered through Thursday but spiked up about 7% on Friday following the KeyBanc research report which highlighted the potential parallels between Harold Hamm’s decision to take Continental Resources private in 2022 against Jerry Jones’s recent buying of Comstock shares.
• Estimated short interest in Forward Air (FWRD) continues to grind higher and has now risen for four consecutive weeks. We last discussed the name three weeks ago when shorts as a percentage of free float on the stock rose three percentage points to 28%, then the highest level since late July, but a more pronounced bearish expression this week – up from 31% to a record-high of 40% – has triggered our screen yet again. The rise in short positioning is also coinciding with the ongoing rebound in shares. Forward Air has now tripled from late May-lows, has risen 50% from mid-August lows when short interest last troughed, and also gained about 9% over the five-day period covered through Thursday, though shares shed about 3% on Friday with trading volumes up at about quadruple the levels seen over the past three months.
• Ortex-reported short interest in Biomea Fusion (BMEA) troughed at 2024 lows of 29.3% early last week, but after modest gains into last Thursday, the short positioning made one of the biggest relative upside gaps in our coverage, jumping from 30.3% to 41.5% – a six-week high. Meanwhile, the stock has been seeing more buying interest over the past month with a near-50% rise and a 16% rise in the five-day period through Thursday, even though it is yet to fully close the extreme sell-off in early June when the FDA placed a clinical hold on its Phase 1/2 trials of BMF-219 in type 2 and type 1 diabetes.

SHORT INTEREST DECLINERS

• Ortex-reported short interest in Kohl’s (KSS) is normalizing this week with a pullback from 43.6% to 40.1%. Short positioning had hit a peak of about 49% last Wednesday, and we profiled the name last week in the context of the stock’s relative underperformance within the Department Store segment. Despite the retreat in reported short interest however, the selling pressure has not abated – despite the broader market rally and the positive performance by all of its sector peers, Kohl’s shares were down another 4% in the five-day period through Thursday.