Remark Holdings Under Attack By Short Sellers

December 12, 2017 at 3:15 pm Leave a comment

After yesterday’s close Nasdaq released its most recent short interest outstanding report. Remark Holdings set a new record with 873,709 – easily besting the previous record set earlier last month by over 27%. While such large increases in the reported short interest often grab the attention of investors, those who have been following the Remark story closely know that there there has been a large and growing naked short interest that is substantially larger than the reported short interest. We note that the volume traded through alternative listings has increased markedly over the last few weeks as well and it appears that the naked short interest has likely grown in lock step with the reported shorts. We also note the significant increase in intraday volatility as short sellers attempt to push MARK shares lower to scoop up stop loss orders.

There was much noise from the short side following Remark CFO Doug Osrow’s sale of MARK shares last week. What seems to be left out of those postings is the fact that Mr. Osrow owns stock options covering many hundreds of thousands more Remark shares, so those arguing that he was selling out his equity stake are disingenuous at best given that the sales only represented a small minority of the skin he has in the game. Shorts seized on those sales to argue that MARK had topped out and it appeared to work for a spell as MARK shares traded down over 20% from its highs at one point, but buyers seized on that opportunity and quickly drove the stock back to new highs over $10.

Capital continues to flow to AI start-ups in China with Samsung participating in a $20M Series B round in Vion Technolgy, a Chinese AI firm focused on machine learning. Other backers: automation company ABB, venture firm Tsing Capital, and investment firm Waterwood. Vion Technology’s products include a smart traffic camera, a face and age recognition terminal for monitoring, and a smart camera that counts people. We believe that KanKan’s operating contracts in the region make it much more valuable than many of these start-ups that we see getting funded each week, likely coming in somewhere below Sensetime’s $3 billion valuation, but significantly higher than the $100m start ups that we continue to see making headlines with new funding rounds and little (if any) revenue.

Remark shares remain significantly undervalued trading anywhere south of $10. We believe that shares will set new 52 week highs several times prior to year end and any material bullish news could cause the shares to gap dramatically higher due to panic buying by short sellers who made the unfortunate decision to hold those bets overnight. Each new high brings more attention to the Remark Holdings story and this should lead to more investors buying shares, extending the virtuous cycle. While MARK is clearly becoming a favorite of swing traders and offers opportunities to profit in that respect, do not fail to hold on to that core position as MARK shares are still undervalued and still well below the radar of many investors and institutional investors who would find its current valuation more than compelling. This should ultimately lead to more buyers with a long term outlook, but in the meantime, the shorts’ machinations are offering many opportunities to buy MARK shares at prices that allow for significant short and long term gains.

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