Facebook Has Short Sellers Deleting Positions

In addition to investors not cashing out of Facebook, short sellers have been running for the exit. The company’s rally over the past few months has coincided with a decrease in short interest. According to investment research firm, Bespoke Investment Group, Facebook’s short interest as a percentage of float peaked at 19.4 percent in August, shortly before the company made new all-time lows below $18 a share.

However, as the chart above from Bespoke shows, short interest has declined from 19.4 percent to less than 6.0 percent. Meanwhile, Facebook’s stock price has surged more than 40 percent, easily outperforming other popular technology names such as Google (NASDAQ:GOOG), Apple (NASDAQ:AAPL), LinkedIn (NYSE:LNKD) and Zynga (NASDAQ:ZNGA).

While the recent move in Facebook is encouraging for investors, shares may face headwinds trying to climb significantly higher until another catalyst emerges. Bespoke explains, “Unfortunately for Facebook bulls, there are now a lot less shorts out there to potentially cover, which makes it more difficult for the stock to rally. Gains going forward will have to come from new buyers stepping in instead of short sellers throwing in the towel.”

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