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Nabors' Alliance with Weatherford: How Did the Market Respond?

PART:
1 2 3 4 5 6 7
Part 5
Nabors' Alliance with Weatherford: How Did the Market Respond? PART 5 OF 7

Short Interest in Weatherford Increased: What Does It Mean?

Short interest in Weatherford International

Short interest in Weatherford International (WFT) stock, as a percentage of its float, was 11% as of February 3, 2017—compared to 9.6% as of December 30, 2016. Since the end of 4Q16, the short interest in Weatherford stock rose 4%. As noted in the following graph, Weatherford’s stock price and short interest as percentage of float have been inversely related in the past three years. Weatherford International accounts for 0.37% of the iShares US Energy ETF (IYE). The Oil & Gas Equipment & Services industry makes up 15.7% of IYE.

Short Interest in Weatherford Increased: What Does It Mean?

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Short interest and stock price

Short interest is the number of shares sold short, divided by the number of shares outstanding. A rise in short interest as a percentage of float, or a rise in short interest, indicates that more investors expect the stock’s price to fall. Weatherford’s stock price has risen 16% since December 30, 2016, despite the rise in short interest.

However, investors should note that the market could go against investors’ sentiment. Also, the share price could increase when investors start buying the stock to cover their short positions. Energy stocks are typically correlated with crude oil prices. What’s Nabors and Weatherford’s correlation with crude oil prices? We’ll discuss this in the next part.

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