CVSL Update – Stunning Short Position Uncovered

November 27, 2015 at 12:30 pm Leave a comment

We have been made aware of a massive short position taken in CVSL shares over the last few weeks, a position of over 2.4 million shares that includes a single institutional bet of 2.1 million shares + the reported CVSL retail short interest per WSJ (a CVSL record in itself) of 316,734 shares. We find this remarkable in many respects, but the most obvious would be that this position would take 33 trading days to cover if the average trading volume of 73,000 shares per day continues and 100% of the volume is short covering. If that 33 days started today, the buying necessary to cover that position would take until January 15, IF 100% OF THE VOLUME TRADED OVER THAT 33 DAYS WERE BUY TO COVER TRANSACTIONS . That is not possible and what is more likely is that the buying will now include not just value investors who recognize CVSL as mispriced, but traders who will see a short position that is such a huge percentage of the available public float for a company whose management controls over 65% of the shares outstanding.  Given the time frame over which this short position has developed, we can not construct a scenario where the price at which the position could have been established would be higher than the $1.50 range. We continue to believe that CVSL trading below $2 is an aberration and we now understand why it actually traded lower after reporting a Q3 that should have pushed the shares much higher.

We view the emergence of this short position as a stunning development, as it would be impossible for this short position to be covered before Q4 is over if normal trading volumes persist. Recent management commentary, channel checks and anecdotal evidence from multiple sources suggest to us what we had already suspected based on the third quarter’s momentum and the general seasonality of CVSL’s businesses – that CVSL is having a great quarter, tracking to report record revenue that we expect to be up 25% or more SEQUENTIALLY over Q3 and possibly the first profitable quarter in its history for Q4. With only 22 full trading days plus two partial trading days until the end of the year, CVSL could conceivably report that record revenue quarter before this short position could be covered. We can not conceive of a more bullish scenario for CVSL shares.


Entry filed under: micro cap, short squeeze, small cap, small cap stocks, Uncategorized. Tags: , , , .

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