Five BDCs With Rising Short Activity
By Dividend Channel Staff, Wednesday, September 27, 1:24 PM ET
The most recent short interest data has just been released for the 09/15/2017 settlement date, and we here at BDC Investor have sifted through this fresh data and screened out these five BDCs. A metric we find particularly useful when comparing short interest data is the "days to cover" metric because it considers both the total shares short and the average daily volume of shares traded. For the five BDCs below, we have detected a notable change in days to cover, not just from the prior reporting period but also going back a full month. The table below summarizes what we found, with the five columns showing data for each of the five BDCs, and the rows showing the days to cover values first from the 08/15/2017 reporting period, then the most recent 09/15/2017 reporting period, followed by the change and percentage change:
At Harvest Capital Credit Corporation (NASDAQ:HCAP), average daily volume at the 09/15/2017 settlement saw a decrease to 13,549, as compared to 23,921 at the 08/15/2017 report. That brought days to cover up to 4.57, a 116.03% increase from the 2.11 days to cover calculated at the 08/15/2017 settlement date. Looking at total shares short, there was a 11,313 share increase to 61,901, a rise of 22.36% since 08/15/2017. The below chart shows the historical days to cover for HCAP at previous short interest release dates:
Meanwhile at Triangle Capital Corporation (NYSE:TCAP), average daily volume at the 09/15/2017 settlement moved lower to 430,804, as compared to 839,493 at the 08/15/2017 report. That brought days to cover up to 2.04, a 342.01% increase from the 0.46 days to cover calculated at the 08/15/2017 settlement date. Looking at total shares short, there was a 492,074 share increase to 880,058, an increase of 126.83% since 08/15/2017. The chart below shows the historical days to cover for TCAP at previous short interest release dates:
Over at Fifth Street Senior Floating Rat (FSFR), average daily volume at the 09/15/2017 settlement decreased to 60,231, as compared to 85,535 at the 08/15/2017 report. The resulting days to cover value was up to 4.08, a 53.85% increase from the 2.65 days to cover calculated at the 08/15/2017 settlement date. Looking at the running total of all outstanding shorted shares, there was a 18,895 share increase to 245,646, a 8.33% increase since 08/15/2017. The below chart plots the historical days to cover for FSFR at prior short interest release dates over time:
At MVC Capital (NYSE:MVC), average daily volume at the 09/15/2017 settlement declined to 34,001, as compared to 55,867 at the 08/15/2017 report. The days to cover calculation moved up to 2.05, a 194.34% increase from the 0.70 days to cover calculated at the 08/15/2017 settlement date. Looking at the total of all open short positions, there was a 30,805 share increase to 69,730, a 79.14% rise since 08/15/2017. The chart below shows the days to cover over time for MVC at previous short interest release dates:
And at KCAP Financial (NASDAQ:KCAP), average daily volume at the 09/15/2017 settlement decreased to 82,099, as compared to 128,790 at the 08/15/2017 report. That brought days to cover up to 2.08, a 107.86% increase from the 1.00 days to cover calculated at the 08/15/2017 settlement date. Looking at total shares short, there was a 90,967 share increase to 170,649, an increase of 114.16% since 08/15/2017. The following chart plots the historical days to cover for KCAP at previous short interest release dates over time:
An increased "days to cover" value could indicate that short sellers are using these BDCs to hedge long bets on other BDCs or elsewhere, or could also mean that short sellers believe the stocks will decline in price. 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. So investors tend to keep an eye on that days to cover metric, because a high value could predict a sharper price increase should a company put out some unexpectedly good news — short sellers might then rush to cover their positions, and if the days to cover number is high, it would then be more difficult to close those positions without sending a stock higher (until the higher price produces enough sellers to generate the necessary volume the short sellers need to close their positions).
In afternoon trading Wednesday, HCAP was up about 0.3% on the day, TCAP was off about 0.5%, FSFR was off about 0.6%, MVC was up about 0.6%, and KCAP was off about 0.1%.
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