Short sellers in REAX have been force-fed an extraordinary lesson in conviction risk. A stock that traded below $2 a month ago now sits at $26.59. Shorts that held firm last week are now scrambling — and the borrow market is showing the strain.
The previous note, published August 22, found short sellers unmoved — 30 million shares short, 14.3% of the free float, barely budging. That changed violently on August 25. Short interest collapsed 90% in a single session, from 30.8 million shares to just 3 million. That is the steepest single-session cover on record for this stock.
The catalyst was a 1,085% single-day price spike. Bears capitulated en masse. The remaining shorts now hold just 2.1% of the free float — a level that would ordinarily be unremarkable.
What's not unremarkable is what happened to the borrow market after.
When 27 million shares of short interest evaporated, brokers pulled supply. Availability has collapsed to 8.6% — meaning only one share remains available to borrow for every twelve already out on loan. That is the tightest this borrow market has been in at least 52 weeks.
Five weeks ago, availability sat above 47%. As recently as August 17 it was 35%. The drop to 8.6% is steep and sudden.
Anyone looking to establish a new short position now faces a severely constrained lending pool. Cost to borrow remains relatively low at 2.83% annually, but that figure typically lags — it has risen 50% over the past month and has room to move higher as availability tightens further.
The price move has forced a rapid repricing of targets. BTIG's Jake Fuller raised his target to $35 on August 27 — from $4.25. Jones Trading's Matthew Erdner lifted to $40 on August 25, up from $4.00. Both maintain Buy ratings. The consensus mean target is now $51.88.
The stock closed at $26.59 on August 26. That implies roughly 95% upside to consensus — a gap that reflects genuine bullish conviction, or targets that haven't fully caught up with a stock that moved 1,473% in a month.
Call buyers are dominant. The put/call ratio sits at 0.12 — well below its 20-day mean of 0.25. On August 25, it hit 0.00. Options positioning has broken decisively from the cautious tone that prevailed through most of August, when the PCR ran above 0.33.
The ORTEX short score now sits at 68.1, eased from above 77 earlier in the month as short interest collapsed. The factor score for analyst recommendation differential ranks at the 96th percentile — indicating an unusually wide gap between analyst consensus and market pricing.
Availability at 8.6% is the key metric. If the remaining 4.5 million shares short face pressure and cover, there is very little borrow supply to replace them. Any new short interest building at these levels does so into an extremely tight lending pool.
Data summary
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