I go through a lot of short-squeeze setups, the kind where a huge chunk of a stock is sold short and everyone starts whispering about a big rip. Groupon (GRPN) keeps landing near the top of mine, so I spent some time on it. Here is what I found, in plain English.
The headline number is real: about 83% of Groupon's tradable shares are sold short, and it would take roughly 15 days of buying for all those shorts to get out. On any screener, that is a flashing-light squeeze setup.
Except it isn't squeezing. It's dropping. The stock went from about $19.71 in early October to $15.75 by month end, down about 20%. The shorts aren't trapped. They're winning. I wanted to know why, and it came down to three things the screener doesn't show you.
1. The borrow is easy, and this is the big one
A real squeeze doesn't happen because a lot of people are short. It happens when the stock gets hard to borrow. When that happens, it gets expensive to stay short and lenders start demanding their shares back, which forces shorts to buy. That forced buying is the squeeze.
Groupon is still easy to borrow. No shortage, no crazy fees, nobody getting forced out. So the shorts can just sit there as long as the trade keeps working, and lately it has. A big short number sitting on an easy borrow isn't a loaded spring. It's a comfortable bet.
2. The shorts are adding, not running
If they were getting squeezed, you'd see them buying back and bailing. Instead, short interest actually went up about 4% while the stock fell 20%. They added to the bet while it was working. That's confidence, not fear.
3. There's a stack of new shares waiting
Groupon has about 10.6 million shares worth of convertibles and options that haven't been issued yet. In plain terms: if the stock ever popped, a pile of fresh shares could show up and get sold right into the rally, capping it. The company can basically print its way out of a squeeze.
The takeaway
The 82% is why Groupon shows up on every squeeze list. The easy borrow, the shorts adding, and that pile of convertibles are why it just sits there while the stock slides. It looks exciting on a screener. Read it closely and it's a short bet that's working.
I'm not telling anyone to buy or sell it. The real point: before you get excited about a giant short number, check whether it's actually hard to borrow, whether shorts are adding or covering, and how many new shares could suddenly appear. Those tell you way more than the headline.
(Numbers from Groupon's filings and the mid-October short-interest reading. Just me sharing research, not investment advice.)