OTF Shorts Retreat as Borrow Conditions Ease Sharply

OTF heads into its August 6 earnings print with short sellers in clear retreat and the lending market looser than it has been all year.

The most striking shift in positioning is in the borrow market. Availability has surged to over 1,000% — meaning there are now more than ten shares available to lend for every one already borrowed — compared to just 55% at the end of June, when the pool was genuinely tight. Cost to borrow has fallen in step, dropping from nearly 10% in late June to 5.2% now, a decline of roughly 37% over the month. Short sellers have been covering aggressively: estimated short interest has fallen 25% over the past month, and another 9% in a single session on August 4. The ORTEX short score has eased to 36.4 from above 43 two weeks ago, confirming that bearish positioning has unwound materially. Positioning has shifted from cautious to comfortable in a matter of weeks.

The stock itself tells a mixed story. OTF closed at $10.42, down 2.6% on the day before the print, though it remains up nearly 5% on the week. That intraday softness contrasts with a broader BDC peer group that broadly gained on the same session — OBDC rose 1.8%, BXSL gained 1.0%, and CGBD added 2.2%. OTF's underperformance on the eve of its own earnings stands out against that backdrop.

The ownership picture adds a layer of institutional weight to the story. The University of California Regents holds nearly 9.5% of shares, and Mubadala Investment Company holds another 6.3%. California State Teachers' Retirement System reported a full new position of 20.2 million shares as of March 31, making it the third-largest holder. These are long-duration, income-oriented investors — the type drawn to BDC dividends rather than capital appreciation. The dividend yield implied by the valuation data runs above 14%, a level that reflects both the income appeal and the credit-risk discount the market applies to technology-focused private lending. Insider activity has been modest but consistent: three directors purchased shares in May at prices between $10.71 and $10.90, close to the current level, signalling that management sees the stock as fairly valued near these lows.

Past reactions to OTF earnings have been volatile. The May 7 print triggered a 6.9% single-day decline and extended losses of 4.9% over five days. The prior quarter's June 25 release produced a 2.8% gain. The print today will test whether the technology lending portfolio has absorbed rising credit costs without meaningful deterioration in net investment income — and whether the dividend, which anchors the bull case, remains comfortably covered.