Heavily Shorted Gogo Has Wall Street Bracing for More Bad News

(Bloomberg) -- In-flight media provider Gogo Inc. faces another crucial test when it reports “key conclusions” from its business review after the market closes Thursday.

The stock has fallen 59 percent this year after the company withdrew a slew of financial forecasts and saw its corporate rating cut by Moody’s. The shares have continued to slide ahead of Thursday’s announcement and the subsequent conference call Friday after Guggenheim lowered its estimates and Morgan Stanley said the company may start cutting costs. There’s no question that Chicago-based Gogo has a lot on its plate, according to Northland Securities analyst Paul Penney.

“Top of mind for us and many investors is the recapitalization plan, as their already over stressed and levered balance sheet can’t absorb continued losses and negative free cash flows,” Penney said Wednesday in an email to Bloomberg News.

Options investors may also be betting on further declines in Gogo shares. Put volume spiked to more than nine times the 20-day average on Wednesday, led by July $4.50 contracts that changed hands about 8,100 times compared to open interest of 201. Gogo closed at $4.59.

Short interest accounts for a whopping 60 percent of float, according to financial analytics firm S3 Partners. That’s up from its 2018 low of 46 percent set in February.

--With assistance from Gregory Calderone.

To contact the reporter on this story: Alexandra Stratton in New York at astratton4@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Brad Olesen

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