The blogosphere is filled with many Apple Inc. (NASDAQ:AAPL) bulls and bears, each electronically interacting in a sea of information each day, in a fashion that’s, well, beautiful. If we can imagine financial journalism as a tool to provide a beacon of light to shore-searching shareholders, then Apple’s investor base is the proverbial 1,000-foot sailing vessel, that’s seen a few too many rough seas.
Over the past six months, shares of Apple Inc. (NASDAQ:AAPL) have lost more than 37% in value, shedding more than $220 billion in market capitalization during this time. More recently, shares have dropped below the $400 mark, passing through a key psychological level in the eyes of many investors. While most of Mr. Market’s attention is with regard to its upcoming earnings report, there’s another topic that has been seething through the stew of daily speculation surrounding Apple.
What is this speculation?
We’ll let a recent article by Philip Elmer-DeWitt, of the Apple 2.0 blog on Fortune, explain. It does so quite succinctly, while feeding the hardest of hardcore Apple Inc. (NASDAQ:AAPL) devotees in the process:
Most deviously of all, it [Samsung] took a massive short position in Apple in the U.S. securities markets, putting selling pressure on the stock and tarnishing Apple’s once-glowing reputation on Wall Street.
OK, so that last bit is admittedly a stretch and purely speculative. Apple’s shares were due to fall of their weight as the company entered several quarters of tighter margins and slower growth.
But the rest of this nightmare fantasy is pretty well-documented fact.
That’s the equivalent of your rude friend prefacing every conversational stab with the words “not to be rude, but […].” It’s the “not to be rude” phrase that intrinsically voids whatever mush is about to come out of their mouth, even if it doesn’t matter to them. Another example of this annoyingly prevalent social phenomenon is in the phrase “no offense, but […].”
In context, Elmer-DeWitt is describing what he calls “a somewhat paranoid theory being circulated among Apple investors,” which aside from his admitted speculation of a Samsung short position, includes “a patent copycat” saga, a “high-profile ad campaign designed to caricature Apple’s customers as foolish sheep,” and a program in which it began “paying students and other heavy users of social media to post anonymous messages talking up the virtues of Samsung’s products and spreading fear, uncertainty and doubt about Apple.”
Each of those points about Samsung’s philosophical position against Apple Inc. (NASDAQ:AAPL) is grounded in reality, but the suggestion that the South Korean multinational is involved in a short-selling campaign against the company’s common stock is not just out of this world, it’s out of this dimension.
Yes, think about that for a second.
As one would reasonably expect, does Elmer-DeWitt present any data with his serious assertion? Nope. In fact, his closing statement reads more like an anonymous message board post, than a conclusion to an article suggesting that one of the biggest companies on this planet is involved in a plot with the aim of “tarnishing Apple’s once-glowing reputation on Wall Street.”
Reading this quote again, it begins to look more and more like a line out of a fictional financial thriller, not a newsworthy Apple Inc. (NASDAQ:AAPL) article circulated amongst the masses. But hey, this isn’t the first CNN article about Apple that has–inadvertently or not–had a questionable storyline about the state of Cupertino (in the past week, no less).
The facts
So, let’s actually take a look at Apple’s short interest over the past year. The data is reported twice a month, at a bit of a delay, but in this case, this presents no issues. Originally sourced from NASDAQ:
A couple things to point out about the tech company’s short interest:
1. Between November 15, 2012 and March 28, 2013, Apple’s short interest has actually fallen by 7.5%. Over this same time, Apple’s stock price fell by 17.5%. Generally speaking, one would expect an inverse relationship between these two metrics.
Yes, we know there’s not a clear one-to-one relationship between short-selling activity and a stock price’s immediate action, but this simple fact sort of blows a hole in Elmer-DeWitt’s assertion that was by his words (not ours), “admittedly a stretch.”
2. While the general trend in short interest over the past year has been for increasing in Apple Inc. (NASDAQ:AAPL)’s float, it still represents a very small percentage of that float, about 2.10% to be exact, according to data from Yahoo! Finance.
Though benchmarks vary, it is widely accepted that only after a stock’s float percentage short exceeds the 20-25% level, there’s actual bearish pressure in play. Check out some of the stocks that actually have a high short interest percentage; Apple is nowhere even close having a level of short-selling activity that’s worth monitoring, let alone speculate on the motivations behind it.
What can financial journalists learn?
It’s not really important that Philip Elmer-DeWitt admits his “speculative” Samsung/Apple Inc. (NASDAQ:AAPL) drama is his own opinion. What’s important is that he voiced it on a highly-trafficked medium, that’s viewed by most readers as a fairly reputable place to obtain their Apple news from.
Unfortunately, many of those who read the post may now think that Apple’s fall in stock price is due to a doomsday plot from a competitor, without any proof to back it up. For the market’s sake, let’s hope many of them didn’t take it seriously.
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Disclosure: none
