SVC Options Turn Bullish as Short Sellers Quietly Exit

Service Properties Trust heads into its August 6 earnings print with an unusual combination: a stock under meaningful price pressure but with short sellers actually retreating.

The options market tells a relatively relaxed story heading into results. The put/call ratio is running at 0.58, a touch below its 20-day average of 0.63 — meaning call activity is fractionally outpacing put demand rather than the defensive hedging that often builds before a troubled REIT's earnings. That small bullish tilt comes despite SVC falling 9% over the past month to $7.88, with another 1% slipping away in the past week. The lending market adds no pressure: borrow availability is extraordinarily loose at nearly 2,000% — roughly 20 shares available for every one already lent out — and the cost to borrow is just 0.59%, barely above risk-free levels.

What makes this genuinely interesting is the short interest collapse. Short sellers have quietly unwound the bulk of their positions — SI % of free float dropped from roughly 10-11% in early July to just 2.6% now, a fall of nearly 74% in a month. That is not a gradual drift; it is a meaningful exit. The days-to-cover reading of around two days confirms the position is now small enough to be exited quickly. Whatever bearish thesis drove the elevated short interest through late June and early July has either resolved or been abandoned.

The bull and bear debate on SVC centres on the company's leverage and asset quality rather than positioning. Bulls point to a strengthening liquidity position — the trust has raised zero-coupon debt and executed steady asset dispositions to address near-term debt maturities — and note that SVC's EPS surprise factor ranks in the 92nd percentile, a sign the company has a history of beating lowered expectations. Bears focus on the persistent operational drag from its hotel and travel center portfolio, negative earnings (the PE is deeply negative), and an EV/EBITDA of around 10x that reflects a business still generating thin cash flows relative to its debt load. The dividend score of just 8 out of 100 captures the reality that distributions were effectively suspended years ago, leaving income investors with little compensation for the risk.

The institutional ownership table adds a notable layer of context. Helix Partners Management and Flat Footed LLC together hold around 17% of shares, both building positions as of April filings. RMR Group — the external manager — added 8.3 million shares in the period ending June, bringing its stake to 6.7%. On the insider side, April saw a cluster of coordinated buying across management and trustees at $1.20 per share, including a $50 million purchase from Adam Portnoy. The stock has since risen sharply from those levels to $7.88, suggesting the insiders bought into a low; however this data is over 90 days old and should be treated as context rather than current signal.

Peer lodging REITs offered no meaningful cover this past week — AHT fell roughly 1%, BHR dropped 10%, and APLE slid 1.6%, while RLJ and INN were roughly flat. SVC's 3% weekly decline tracks broadly with the softer tape across the group.

The print will therefore test whether SVC's operational fundamentals — particularly hotel RevPAR trends and travel center net operating income — justify the dramatic short-covering of the past month, or whether that exit proved premature.