Disclaimer: The analyst who wrote this piece owns shares in Strategy (Mstr)
Traders Shorting Strategy (MSTR), Bitcoin buyer, whose share price got 13% in March, can fight to find enough shares to repay the lenders who supported their efforts that the company’s value would fall.
More than $ 180 million trading in Mstr stock could not run last month, data from sec and fine show. These events, which are known as mistakes to deliver (FTDs), happen when a seller does not supply shares to the buyer within the time limit, now only one working day after the trade (t+1).
FTDs may be the result of administrative errors or slow settlement systems, but may also indicate that short sellers who borrow shares and sell them in the hope that they can buy them back at a lower price when it comes to returning them to the lender, having difficulty finding enough stock to repurchase. It is often a sign that a big move in both directions can come.
As the price of the strategy increased during March, Mstr recorded several large FTDs, including on March 26, when over 186,465 shares failed to run, worth nearly $ 64 million, according to FineLel Data. Other high volumes include March 17 and March 21, when combined failed deliveries made up tens of thousands of millions of dollars. In total, 609,000 shares failed to deliver over the month, a remarkable amount for a single stock.
Short interest rates remain elevated in the stock. From April, about 29 million shares are sold short, more than 12% of all publicly available shares, according to Finel Data. The data also shows that approx. One-third of MSTR dealers on April 22, short sales were performed off-exchange in private venues such as dark pools. While these trades are fully spoken in official short-interest reports, the lack of transparency is making it more difficult for the public to track short-term activity in real time.
MSTRS share price has been climbed recently. It has achieved 35% since the beginning of March, has increased by 44% from April’s low and a total of 8% on Tuesday. As the price rises, short sellers may be forced to buy shares back to cover their positions, especially if they can’t borrow anymore.
This scenario can trigger a short clamp, a strong price increase caused by short cover – short sellers who want to buy to cover their efforts. It is a dynamic that the market has already looked playing out in Bitcoin (BTC) over the last 24 hours.
While FTDs do not necessarily indicate price manipulation or predict a clamp, their size and frequency in MSTR suggest a potential outbreak or collapse driven by short salespeople.
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