HK: Insiders vs. Shorts

The most recent short interest data was recently released by the NASDAQ for the 12/13/2013 settlement date, and Halcon Resources Corp ( HK) is one of the most shorted stocks of the Russell 3000, based on 8.01 "days to cover" versus the median component at 4.20. There are a number of ways to look at short data, but one metric that we find particularly useful is the "days to cover" because it considers both the total shares short and the average daily volume of shares typically traded. The number of shares short is then divided by the average daily volume, to express the total number of trading days it would take to close out all of the open short positions if every share traded represented a short position being closed.

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In the case of Halcon Resources Corp ( HK), the total short interest at the 12/13/2013 settlement date was 48,989,726 shares, which compares to the average daily trading volume of just 6,117,022 shares, for a "days to cover" ratio of 8.01.

When short sellers eventually cover their positions, by definition there must be buying activity because a share that is currently sold short must be purchased to be covered. At the present levels of short interest, if from this point forward every single HK share traded represented a short position being closed, then at the average daily volume of 6,117,022 shares it would only be during the 9th trading day that every short position would be closed.

So it would stand to reason that should some unexpectedly good news come out, and short sellers did not have 9 days of patience but instead wanted to cover their short positions very suddenly, that situation could result in sending the stock higher until the higher price produces enough sellers to generate the necessary volume to close out those positions quickly.

Halcon Resources Corp ( HK) has something relatively rare for a stock with this much short interest, that being insiders taking the other side of the trade. Looking back over the trailing six month period, HK has seen 14 different instances of insider buying, as summarized by the table below:

Purchased Insider Title Shares Price/Share Value
08/08/2013 Floyd C. Wilson Chairman and CEO 100,000 $5.10 $510,000.00
08/08/2013 Stephen W. Herod President 25,000 $5.10 $127,500.00
08/08/2013 Mark Mize EVP, CFO and Treasurer 50,000 $5.10 $255,000.00
08/08/2013 David S. Elkouri EVP, General Counsel 20,000 $5.10 $102,000.00
08/08/2013 Larry L. Helm EVP, Corporate Affairs 20,000 $5.10 $102,000.00
08/08/2013 Charles E. Cusack III EVP, Chief Operating Officer 20,000 $5.10 $102,000.00
08/08/2013 Joseph S. Rinando III VP, Chief Accounting Officer 10,000 $5.10 $51,000.00
08/08/2013 Leah R. Kasparek VP, Human Resources 20,000 $5.10 $102,000.00
08/08/2013 James W. Christmas Director 100,000 $5.10 $510,000.00
08/08/2013 Thomas R. Fuller Director 40,000 $5.10 $204,000.00
08/08/2013 David S. Hunt Director 200,000 $5.10 $1,020,000.00
08/08/2013 Tina S. Obut VP, Corporate Reserves 10,000 $5.29 $52,900.00
08/08/2013 Pension Plan Investment Board Canada 5,185,553 $5.10 $26,446,320.30
08/20/2013 Charles E. Cusack III EVP, Chief Operating Officer 40,000 $4.86 $194,400.00
08/21/2013 David S. Hunt Director 50,000 $4.73 $236,656.56
11/06/2013 Charles E. Cusack III EVP, Chief Operating Officer 20,000 $4.75 $95,000.00
11/06/2013 Tina S. Obut VP, Corporate Reserves 5,000 $4.67 $23,349.50
11/07/2013 Charles E. Cusack III EVP, Chief Operating Officer 20,000 $4.55 $91,000.00
11/19/2013 Charles E. Cusack III EVP, Chief Operating Officer 20,000 $4.23 $84,600.00
11/22/2013 Tina S. Obut VP, Corporate Reserves 5,000 $4.11 $20,549.50
12/04/2013 Tucker S. Bridwell Director 10,000 $3.80 $37,999.00
12/04/2013 David S. Elkouri EVP, General Counsel 25,000 $3.72 $93,120.00
12/05/2013 Mark Mize EVP, CFO and Treasurer 50,000 $4.00 $199,898.29
12/05/2013 Charles E. Cusack III EVP, Chief Operating Officer 40,000 $3.81 $152,319.67
12/05/2013 Scott M. Zuehlke VP, Investor Relations 2,500 $3.99 $9,975.00
12/05/2013 Floyd C. Wilson Chairman and CEO 100,000 $4.00 $399,616.00
12/06/2013 David S. Hunt Director 10,000 $3.82 $38,200.00

Below is a chart showing the "days to cover" for HK over time:

Loading+chart++2013+TickerTech.com

And looking at the chart below, HK's low point in its 52 week range is $3.60 per share, with $8.28 as the 52 week high point — that compares with a last trade of $3.92.

Halcon Resources Corp Moving Averages Chart

In recent trading, shares of Halcon Resources Corp ( HK) were changing hands at $3.92/share.

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