Uber Short Sellers Are Cashing Out In Droves

Uber Technologies Inc UBER got off to one of the most disappointing starts on the public market in recent memory, although shares have rallied 13.3% in the past week. One of the driving forces behind the pick up in buying volume may be short sellers, who are now cashing in their Uber profits and covering their positions in droves.

Over the past month, the size of Uber’s outstanding short position has dropped by 27.8 million shares, or roughly $779 billion, according to S3 Partners. S3 analyst Ihor Dusaniwsky said this week Uber’s short position is down 48% in that time.

Short Sellers Making Bank

Year to date, Uber has been the third most profitable U.S. short, netting short sellers a profit of more than $644 million, roughly a 44% gain. Uber shorts added another $251.1 million to their gains in the last month alone, although the past week has eaten into the profits of the remaining short sellers.

Even after all the covering, Uber still has more than $834 million in short interest remaining.

Dusaniwsky said short sellers likely saw Uber’s lockup expiration as an opportunity to cash out of their positions.

“Such substantial and hurried short covering is usually a sign of a short squeeze, traders pulling their fingers away from a hot stove, but in this case it may be a signal of a market bottom for UBER after its IPO lockup expiry,” Dusaniwsky said.

Benzinga’s Take

Short covering is a good sign for Uber bulls because it's a signal short sellers see little additional downside in the near-term. However, for the Uber bounce to maintain its momentum, the company will ultimately need to demonstrate improved fundamental metrics and a viable path to long-term profitability.

Uber's stock traded around $29.93 per share at time of publication.

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