On Deck Capital Inc (ONDK) Partnership Torches Shorts

On Deck Capital Inc's (NYSE:ONDK) new partnership with JPMorgan Chase & Co. (NYSE:JPM) has the shares flying high, and short sellers feeling the pain

Dec 2, 2015 at 1:24 PM
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Small business lender On Deck Capital Inc (NYSE:ONDK) has added 36.1% today to trade at $12.26, amid news the firm has established a partnership with JPMorgan Chase & Co. (NYSE:JPM), which will likely begin in 2016. While many on the Street are certainly celebrating the deal, short sellers may be licking their wounds. 

Specifically, short interest on ONDK makes up almost one-fourth of its float. At typical daily volumes, it would take these bears over two weeks to repurchase their bets. That's a large amount of sideline cash that could pave the way for a short-squeeze situation.

Meanwhile, in today's option trading, the most popular strike is the December 10 put. More broadly speaking, put volume is running at five times the usual afternoon rate, and ranks in the 99th percentile of its annual range.

It's also worth noting that ONDK's Schaeffer's put/call open interest ratio (SOIR) stands at 1.63. This means put open interest heavily outweighs call open interest among the stock's front three-months' series of options. Looking back, this reading stands 52% higher than where it was just a month ago. In short, put open interest has been swelling. 

As far as analysts go, 47% of covering brokerage firms rate ONDK a "hold" or "strong sell."  However, the stock's consensus 12-month price target of $17.14 stands at a 40% premium to current levels, even after this morning's bullish gap.

Speaking of which, On Deck Capital Inc's (NYSE:ONDK) surge is unusual, from a longer-term perspective. The shares have been moving lower since hitting the Street last December, dropping more than half their value. 
 

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