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June 27, 2001
Short Interest Increases
On Nasdaq to Hit Record
By CASSELL BRYAN-LOW
Staff Reporter of THE WALL STREET JOURNAL
NEW YORK -- Short interest on the Nasdaq Stock Market rose to a
record in the latest month, as short sellers increased their bets on a
pullback in stock prices.
The level of short sales not yet closed out, known as short interest, rose
2.9% to a record 3,821,862,973 shares in the month through June 15, up
from 3,713,132,045 shares mid-May. The figures include Nasdaq
small-capitalization and large-capitalization stocks and reflect transactions
through June 12, allowing extra days to complete settlement. The previous
record was 3,764,094,547 shares in April.
The rally in the technology-laden Nasdaq
Composite Index in May caused short sellers
to give back a lot of gains, says Harry Strunk,
an investment adviser in Palm Beach, Fla.,
who surveys professional short sellers. Now, short sellers are "very, very
cautious," he says.
An interest-rate cut announcement from the Federal Reserve could spur a
rally in the market, which hurts short sellers, who profit when shares fall,
and they "are fearful of the cash sitting on the sidelines waiting to come
back into the market," says Mr. Strunk.
On the Nasdaq SmallCap Market, which is comprised of 748 smaller
stocks with a capitalization of at least $35 million, the number of short sales
outstanding fell 5.1%. It was up 3% for the 3,644 larger-capitalization
stocks on the Nasdaq National Market, which generally have a
capitalization of more than $50 million.
Short interest is often considered an indication of the level of skepticism in
the market. Traders who sell securities "short" borrow shares and then sell
them, betting they can profit by buying the stock back later at lower prices.
Short interest reflects the number of shares that haven't been repurchased
for return to lenders. Aside from making negative bets, investors may rely
on short selling for other purposes, such as a hedging strategy related to
corporate mergers and acquisitions, for convertible securities and options,
and for tax purposes.
The Nasdaq National Market's short-interest ratio rose to 2.19 days from
1.79 days in the previous month. The short-interest ratio for the smaller
stocks declined to 1.06 days from 1.65 days. The ratio is the number of
trading days that would be required to close out the short positions through
share purchases and is considered a measure of trading sentiment.
The following companies had the largest volume decreases in short sales
outstanding: Dell Computer Corp. fell 13,037,410 shares to 42,181,008
shares; Shire Pharmaceuticals Group PLC fell 11,434,413 shares to
3,992,193 shares; ASML Holding NV fell 10,284,684 shares to
3,766,805 shares; and Network Appliance Inc. fell 5,635,342 shares to
8,188,224 shares.
The following companies had the largest volume increases in short sales
outstanding: Nextel Communications Inc. rose 24,410,817 shares to
45,916,049 shares; Sun Microsystems Inc. rose 11,241,480 shares to
35,302,049 shares; Charter Communications Inc. rose 10,106,391 shares
to 30,568,782 shares; and WorldCom Group rose 7,568,093 shares to
80,591,591 shares.
The next Nasdaq short-selling report will be published in The Wall Street
Journal July 25.
Write to Cassell Bryan-Low at cassell.bryan-low@wsj.com
KJC |
