Mobileye short interest is likely to start falling soon as short-sellers lost $398 million on their bets due to the news that Intel is acquiring the autonomous driving firm. Intel is the world’s largest chip maker, and the acquisition could vault it to the front of the line in autonomous driving technology, as Mobileye has been the dominant force in this area for some time.
Intel agreed to pay $15.3 billion or $63.53 per share to acquire the company, representing an approximately 34% premium above Friday’s closing price. Mobileye stock skyrocketed immediately after the deal was announced, pushing to as high as $61.51 on Monday.
Mobileye short interest on the decline
Ihor Dusaniwsky, head of research at financial analytics firm S3 Partners, said Mobileye short interest peaked at $1.9 billion in June 2016 but then started pulling back. Short interest in the name reached $1.2 billion by September as Mobileye stock soared to its 2016 and 2017 high of $49.66. The stock plunged to the lower $30 per share range in December but has since skyrocketed since the beginning of the year.
Dusaniwsky said today that Mobileye short interest is up 28% year to date, rising back to the September level of $1.2 billion. Citron Research, which said last year that the company was overvalued, renewed its arguments again in February, which Dusaniwsky said has helped boost Mobileye short interest year to date.
Andrew Left, who heads up Citron, issued a statement on Twitter about Intel’s acquisition of the company.
“While we are scratching our heads at the economics of paying almost 30x 2017 revenue, the deal is down and we move on,” he wrote. “Who should be most amazed is management, who has sold hundreds of millions of dollars of stock at significantly lower prices during Mobileye’s short lifetime as a public company… Neither Citron nor any analysts who covers [sic] Mobileye saw this coming.”
Mobileye short-sellers won last year
As Citron pressed its short thesis on Mobileye last year, short-sellers ended the year ahead. Dusaniwsky said the shorts raked in $5.6 million, net of financing mark to market P/L on the average short position of $1.3 billion. However, he adds that they were down today even before the acquisition announcement, with the average short position of $1.2 billion falling by about 20% or $239.5 million year to date.
Mobileye short-sellers lost another $397.5 million in the premarket trading hours just from the announcement about the Intel deal, he added. This boosted the year to date mark to market P/L loss to $637 million, representing a loss of about 53% for short-sellers. Dusaniwsky expects a “significant amount” of short covering in Mobileye over the “next couple of weeks,” unless short-sellers are convinced that the deal won’t close.
“Most of the $1.2 billion should be licking their wounds and closing down their positions before the deal closes at $63.54,” he advised.
It’s unclear from Left’s statement whether Citron will be covering its short, although he did say that they would “move on,” essentially meaning that they’re chalking this up as a loss.