Rising Short Interest at Red Hat

This column was originally published on RealMoney on Nov. 29 at 11:24 a.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Recent short interest data show a big jump in the number of investors betting against enterprise-software play Red Hat (RHAT Quote). As of Nov. 15, short interest as a percentage of float (total shares available in the market) had increased 29% from the month-earlier level, with 11.4% of available shares now being sold short.

This is a far cry from the near-40% short-interest level at Crocs (CROX Quote) that I noted earlier this month. However, it does illustrate the growing concern over Red Hat's ability to make headway vs. Novell (NOVL Quote), which teamed up with Microsoft (MSFT Quote) about a month ago, as well as Oracle (ORCL Quote), which announced its entrance into the Linux distribution business in late October.

Sometimes a rising short-interest level will create a buying opportunity for investors, as the balance between optimism and pessimism gets overly skewed toward the latter. But in this case, Red Hat's short bandwagon has room. ...