Short Seller are Hating on LinkedIn, Groupon Ahead of Q4 Results

With quarterly earnings reports due in later this week, short activitiy in names such as LinkedIn (NYSE:LNKD) and Groupon (NASDAQ:GRPN) is on the increase, the Wall Street Journal reports.

Data from securities-financing tracker Data Explorers reveals that short interest in LinkedIn has climbed to a “new, unprecedented high” of 5 percent of total shares. This is an increase of one percentage point since LinkedIn’s secondary offering in November.

A great deal of short interest could mean that a share price is about to decline. However, it can also be a hedge, or counterbet, for someone who has bought a large number of shares of a company with the belief that the share price will go up, said the Wall Street Journal.

To short shares, investors borrow the stock and then sell it in a gamble that the price of the shares will decrease so they can buy them back at a lower price and return them to the lender.

LinkedIn is up 28 percent since the beginning of this year. Analysts surveyed by Thomson Reuters expect LinkedIn to post earnings of 7 cents a share on revenue of about $160 million in the fourth quarter.

Data Explorers also shows that short interest in Groupon is also up to about 2 percent of total shares outstanding. “Although this is relatively low in absolute terms, it represents almost all of the lendable supply available to be borrowed, given the limited stock that was floated in the initial offering,” said the firm.

Groupon’s stock has increased 19 percent in 2012. Groupon reports earnings on Wednesday, while LinkedIn is set to report results on Thursday.

To contact the reporter on this story: Gina Smith at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com