47% of KKD shares are now sold short (!) (according to WSJ article, which was not even about this massive short interest).
My own response to the 47% number : Now I know why KKD has been drifting up lately.
Maybe we will have a huge short squeeze (?)
Jon.
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May 27, 2005 3:18 p.m
Krispy Kreme Options Trading Becoming Less Of An Option
By MARY ELLEN LLOYD
Of DOW JONES NEWSWIRES
CHARLOTTE -- Krispy Kreme Doughnuts Inc. (KKD) investors are finding fewer options to hedge their bets on the stock as a result of the company's failure to file financial reports on time.
The Philadelphia Stock Exchange, one of five exchanges that trade options, has ceased trading Krispy Kreme's put and call options after the specialist making a market in the securities decided to delist them, an exchange representative said Friday.
Meanwhile, Philadelphia and three of the other four options exchanges said they won't issue new series of puts and calls because Krispy Kreme has fallen out of compliance with requirements to file timely reports with the Securities and Exchange Commission.
A put option gives an investor the right to sell a set number of shares at a future date for a fixed price, while a call option provides the right to buy shares in the future. The options are typically issued in series based on when the rights expire (in Krispy Kreme's case, for example, it has options that expire in August 2005, January 2006 and January 2007).
Representatives from the Chicago Board Options Exchange, the American Stock Exchange and the International Securities Exchange all said those exchanges are no longer issuing new series for Krispy Kreme. Representatives cited exchange rules that an issuer of the underlying security must file routine reports with the SEC. That means once current options expire, no options will be available for trading unless the company regains compliance and the exchanges issue new series.
A spokesman for the Boston Stock Exchange couldn't immediately comment on new listings but said current Krispy Kreme options are trading as usual, as they are at the other exchanges.
Krispy Kreme hasn't filed a quarterly report since September with the SEC, which is investigating the company's accounting and franchise repurchases. The Winston-Salem, N.C., doughnut maker has said that because of pending restatements, investors should not rely on the company's financial statements going back to its initial public offering in 2000. And it won't predict when it might file its report for the fiscal year ended Jan. 30, a report that was originally due April 15.
A Krispy Kreme representatives couldn't be reached immediately for comment Friday.
For investors, the new restrictions mean fewer choices for hedging any downside risk on Krispy Kreme shares, said Michael Schwartz, chief options strategist at Oppenheimer.
He said it's more common for options to be delisted due to lack of investor interest than due to lack of requirements to file financial reports.
Unless Krispy Kreme regains compliance, its options could disappear altogether eventually, said Chris Johnson, director of quantitative research for Schaeffer's Investment Research, which publishes an options newsletter.
"What's already out there is out there, it's just not going to trade as much," he said.
The restrictions are of particular interest considering Krispy Kreme's shares have always been volatile, and investors may be looking for ways to hedge their bets.
Krispy Kreme is also heavily shorted, with 29 million, or 47%, of Krispy Kreme shares sold short. Short sellers typically borrow shares from a broker and then sell them, hoping to repay the loan later with shares bought at a lower price.
Corporate web site: krispykreme.com
-By Mary Ellen Lloyd, Dow Jones Newswires, 704-371-4033; maryellen.lloyd@dowjones.com
Copyright © 2005 Dow Jones & Company, Inc. All Rights Reserved. |
