SFXE: Insiders vs. Shorts

The most recent short interest data was recently released by the NASDAQ for the 05/15/2015 settlement date, and SFX Entertainment, Inc. (SFXE) is one of the most shorted stocks of the Russell 3000, based on 14.76 "days to cover" versus the median component at 5.60. 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.

START SLIDESHOW:
Ten Bargains You Can Buy Cheaper Than The Insiders Did »

In the case of SFX Entertainment, Inc. ( SFXE), the total short interest at the 05/15/2015 settlement date was 8,525,555 shares, which compares to the average daily trading volume of just 577,700 shares, for a "days to cover" ratio of 14.76.

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 SFXE share traded represented a short position being closed, then at the average daily volume of 577,700 shares it would only be during the 15th 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 15 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.

SFX Entertainment, Inc. ( SFXE) 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, SFXE has seen 2 different instances of insider buying, as summarized by the table below:

Purchased Insider Title Shares Price/Share Value
12/02/2014 Robert F. X. Sillerman CEO and Chairman of the Board 444,092 $4.38 $1,942,902.50
12/02/2014 Mitchell J. Slater V.C. of the Board of Directors 20,000 $4.38 $87,500.00
12/03/2014 Robert F. X. Sillerman CEO and Chairman of the B.O.D. 1,330,290 $4.21 $5,600,620.20
12/04/2014 Mitchell J. Slater V.C. of the Board of Directors 20,000 $4.47 $89,400.00
12/09/2014 Mitchell J. Slater V.C. of the Board of Directors 30,000 $4.31 $129,400.00
12/11/2014 Mitchell J. Slater V.C. of the Board of Directors 20,000 $4.09 $81,800.00
12/16/2014 Mitchell J. Slater V.C. of the Board of Directors 30,000 $3.85 $115,400.00
12/18/2014 Mitchell J. Slater V.C. of the Board of Directors 20,000 $3.90 $77,900.00
12/23/2014 Mitchell J. Slater V.C. of the Board of Directors 30,000 $4.32 $129,600.00
12/29/2014 Mitchell J. Slater V.C. of the Board of Director 30,000 $4.45 $133,500.00

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

Loading+chart++2015+TickerTech.com

And looking at the chart below, SFXE's low point in its 52 week range is $3.13 per share, with $8.67 as the 52 week high point — that compares with a last trade of $4.89.

SFX Entertainment, Inc. Moving Averages Chart

In recent trading, shares of SFX Entertainment, Inc. ( SFXE) were changing hands at $4.89/share.

More from Stocks

Banks Prepare to Up Shareholder Payouts By $30 Billion

Banks Prepare to Up Shareholder Payouts By $30 Billion

Starbucks Just Revealed Some of the Most Worrying Data in Its History

Starbucks Just Revealed Some of the Most Worrying Data in Its History

Dow Plunges on Trade War Worries but Walmart and Verizon Finish Positively

Dow Plunges on Trade War Worries but Walmart and Verizon Finish Positively

Trump's Tariff Attack Hasn't Brought Pain to These Hot Stocks

Trump's Tariff Attack Hasn't Brought Pain to These Hot Stocks

Biotech Firm Sarepta Surges 40% on Positive Test Results

Biotech Firm Sarepta Surges 40% on Positive Test Results