SmileDirectClub Ripe for Short Squeeze After Year’s 50% Rally

(Bloomberg) -- Investors betting against SmileDirectClub Inc. should tread lightly over the coming weeks as the maker of teeth-straightening products is a “prime candidate for a short squeeze,” according to analysis from S3 Partners.

As bears continue to pile in despite shares staging a comeback to start the year, losses so far have “more than wiped out 2019 gains and put short sellers solidly in the red,” the report from Ihor Dusaniwsky said. The combination of a rocky start for shorts paired with rising borrow rates indicates short covering could pick up steam ahead of earnings due next month, he continued.

The company has climbed 50% so far in 2020 as its market value again topped $5 billion on Wednesday, though still down from a September peak of $7.5 billion. Short interest has continued to hit record high after record high, with roughly half of shares available for trading currently sold short, according to data compiled by financial analytics firm S3 Partners.

SmileDirectClub, Align Tech Diverge After Wolfe’s Big Calls

With earnings not expected until the end of next month, quarterly results from competitor Align Technology Inc. will serve as the next catalyst for shares of SmileDirectClub. Align Technology, the maker of the Invisalign teeth-straightener, is set to unveil fourth-quarter results after the U.S. market close.

To contact the reporter on this story: Bailey Lipschultz in New York at blipschultz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Jennifer Bissell-Linsk

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