CAVA Lockup Expiry May Spur Short Selling
Author:
Ihor Dusaniwsky
Managing Director of Predictive Analytics, S3 Partners
Matthew Unterman
Director of Predictive Analytics, S3 Partners
Cava Group Inc (CAVA) post IPO lockup agreement is set to expire on December 12th and the re-jiggering of long shareholders may open the floodgates for increased short selling in the stock. CAVA is the tenth largest short in the restaurant sector with $385 million of short interest, 69.22% SI % Float and an 70.57% stock borrow fee. CAVA’s 69.22% SI % Float is the largest in the sector followed by Dutch Bros Inc (BROS) at 19.36% and Krispy Kreme Inc (DNUT) at 16.16% (shorts with over $100 million of short interest). And CAVA is also the only stock with over 1% stock borrow fee in the sector (shorts with over $100 million of short interest).
Restaurant Sector Short Interest
Ticker
SI % Float
Stock Borrow Fee
Short Interest
McDonald's Corp
MCD
1.00%
0.30
$2,073,373,239
Chipotle Mexican Grill Inc
CMG
2.96%
0.30
$1,798,939,123
DoorDash Inc
DASH
6.09%
0.30
$1,618,007,482
Starbucks Corp
SBUX
1.03%
0.30
$1,097,532,913
Restaurant Brands Intl
QSR
4.00%
0.30
$893,651,038
Darden Restaurants Inc
DRI
4.01%
0.30
$774,101,495
Domino's Pizza Inc
DPZ
5.15%
0.30
$717,662,862
Yum! Brands Inc
YUM
1.64%
0.30
$570,978,823
Wingstop Inc
WING
7.27%
0.30
$512,935,163
Cava Group Inc
CAVA
69.22%
70.57
$386,290,143
Yum China Holdings Inc
YUMC
2.31%
0.30
$369,466,996
Aramark
ARMK
4.46%
0.30
$314,477,384
Texas Roadhouse Inc
TXRH
3.70%
0.30
$281,616,376
Dutch Bros Inc
BROS
19.36%
0.95
$269,698,913
Papa John's International Inc
PZZA
11.27%
0.30
$258,056,423
Bloomin' Brands Inc
BLMN
10.68%
0.30
$225,343,905
Cheesecake Factory Inc
CAKE
13.71%
0.30
$218,695,029
Brinker International Inc
EAT
12.32%
0.30
$212,282,744
Shake Shack Inc
SHAK
8.31%
0.30
$191,752,160
Cracker Barrel Old Country Store
CBRL
11.83%
0.30
$189,580,485
Top Twenty
6.43%
2.41
$12,974,442,694
Total Sector
6.65%
2.25
$14,063,792,414
U.S. Average
5.00%
0.60%
The lack of stock borrow supply has greatly hindered short selling in the stock and stock borrow demand has pushed rates to 74.32% fee trailing only Beyond Meat Inc (BYND) at 99.57% fee.
There has been moderate short selling in the restaurant sector recently with $488 million of shares shorted over the last thirty days, a reversal of the $248 million of short covering we saw in the first ten months of the year. Chipotle Mexican Grill Inc (CMG) and Domino’s Pizza Inc (DPZ) were the most shorted stocks over the last thirty days with DoorDash Inc (DASH) and Darden Restaurants Inc (DRI) seeing the most short covering.
CAVA had $33 million of new short selling over the last thirty days but this number does not accurately reflect the increased short side demand in the stock. Lack of stock loan availability to settle new short trades and expensive stock borrow costs has constrained short selling. Shares shorted had steadily climbed to nine million shares by early September and its growth rate dropped considerably only when the stock borrow market became tight.
Restaurant Sector Shares Shorted
Ticker
Short Interest
YTD Change
30 Day Change
McDonald's Corp
MCD
$2,073,373,239
$236,970,880
$79,927,236
Chipotle Mexican Grill Inc
CMG
$1,798,939,123
($236,559,099)
$235,628,526
DoorDash Inc
DASH
$1,618,007,482
($627,028,394)
($104,002,822)
Starbucks Corp
SBUX
$1,097,532,913
($277,868,714)
$58,300,777
Restaurant Brands Intl
QSR
$893,651,038
$372,120,281
$679,080
Darden Restaurants Inc
DRI
$774,101,495
$328,423,243
($55,337,321)
Domino's Pizza Inc
DPZ
$717,662,862
$98,145,888
$81,969,408
Yum! Brands Inc
YUM
$570,978,823
$198,212,656
$69,788,920
Wingstop Inc
WING
$512,935,163
($319,263,946)
($31,400,026)
Cava Group Inc
CAVA
$386,290,143
$386,290,143
$32,930,618
Yum China Holdings Inc
YUMC
$369,466,996
($37,838,404)
$73,999,387
Aramark
ARMK
$314,477,384
$33,044,237
($7,003,530)
Texas Roadhouse Inc
TXRH
$281,616,376
($264,302,075)
$22,876,932
Dutch Bros Inc
BROS
$269,698,913
$11,294,178
$39,329,830
Papa John's International Inc
PZZA
$258,056,423
$128,362,744
($10,261,018)
Bloomin' Brands Inc
BLMN
$225,343,905
($2,897,267)
($22,264,539)
Cheesecake Factory Inc
CAKE
$218,695,029
($90,929,262)
($1,804,000)
Brinker International Inc
EAT
$212,282,744
$56,452,236
$3,246,199
Shake Shack Inc
SHAK
$191,752,160
$18,350,470
$4,634,370
Cracker Barrel Old Country Store
CBRL
$189,580,485
$57,546,279
$5,736,633
Top Twenty
$12,974,442,694
$68,526,074
$476,974,661
Total Sector
$14,063,792,414
$240,045,024
$488,183,499
The restaurant sector performed on par with the S&P 500 resulting in $2.37 billion of year-to-date mark-to-market losses, down -18.66% for the year. In December, the restaurant sector slightly outperformed the S&P 500 with short sellers down $272 million in December month-to-date mark-to-market losses, down -1.94% for the month.
CAVA was the second best performing short in the restaurant sector, up $88 million in year-to-date profits +30.98%, only behind Yum China Holdings Inc (YUMC) which was up $99 million in year-to-date profits +23.38%. Cava shorts are also up slightly in December, up $6 million in month-to-date mark-to-market profits, +1.54%.
Restaurant Sector MTM P\L
Ticker
YTD MTM P\L
P\L %
Dec MTM P\L
P\L %
McDonald's Corp
MCD
($164,652,346)
-9.41%
($35,410,234)
-1.72%
Chipotle Mexican Grill Inc
CMG
($666,664,884)
-47.81%
($19,488,939)
-1.08%
DoorDash Inc
DASH
($949,145,663)
-76.47%
($81,937,436)
-5.19%
Starbucks Corp
SBUX
$50,123,726
3.77%
$33,684,903
2.97%
Restaurant Brands Intl
QSR
($115,523,222)
-17.84%
($19,519,706)
-2.22%
Darden Restaurants Inc
DRI
($120,358,603)
-15.36%
($21,643,807)
-2.85%
Domino's Pizza Inc
DPZ
($103,453,415)
-20.64%
($16,495,899)
-2.31%
Yum! Brands Inc
YUM
$9,284,499
1.80%
$5,943,420
1.03%
Wingstop Inc
WING
($310,991,286)
-71.06%
($11,905,245)
-2.24%
Cava Group Inc
CAVA
$88,004,436
30.98%
$5,979,027
1.54%
Yum China Holdings Inc
YUMC
$99,106,284
23.38%
$29,312,560
7.62%
Aramark
ARMK
$108,547,052
27.10%
$9,728,231
3.07%
Texas Roadhouse Inc
TXRH
($91,214,648)
-20.91%
($5,046,430)
-1.76%
Dutch Bros Inc
BROS
($30,181,686)
-12.00%
($7,839,093)
-2.93%
Papa John's International Inc
PZZA
$32,012,359
18.35%
($21,643,869)
-8.42%
Bloomin' Brands Inc
BLMN
($42,529,350)
-16.11%
($12,841,470)
-5.90%
Cheesecake Factory Inc
CAKE
($18,934,075)
-6.98%
($15,918,693)
-7.50%
Brinker International Inc
EAT
($32,174,628)
-17.39%
($19,605,313)
-9.52%
Shake Shack Inc
SHAK
($63,705,934)
-34.54%
($3,350,115)
-1.80%
Cracker Barrel Old Country Store
CBRL
$41,053,406
19.86%
($17,450,036)
-9.45%
Top Twenty
($2,281,397,978)
-19.52%
($225,448,144)
-1.74%
Total Sector
($2,372,758,681)
-18.66%
($271,535,157)
-1.94%
The restaurant sector is not a crowded short with an average crowded score of 33.82 versus the market average of 32.89. But CAVA is an extremely crowded short with a 100/100 crowded score due to its high SI % Float, stock borrow costs and days to cover.
Restaurant Sector Crowded Score
Ticker
Crowded Score
McDonald's Corp
MCD
27.50
Chipotle Mexican Grill Inc
CMG
27.50
DoorDash Inc
DASH
37.50
Starbucks Corp
SBUX
22.50
Restaurant Brands Intl
QSR
40.00
Darden Restaurants Inc
DRI
35.00
Domino's Pizza Inc
DPZ
27.50
Yum! Brands Inc
YUM
22.50
Wingstop Inc
WING
35.00
Cava Group Inc
CAVA
100.00
Yum China Holdings Inc
YUMC
17.50
Aramark
ARMK
25.00
Texas Roadhouse Inc
TXRH
20.00
Dutch Bros Inc
BROS
65.00
Papa John's International Inc
PZZA
42.50
Bloomin' Brands Inc
BLMN
47.50
Cheesecake Factory Inc
CAKE
52.50
Brinker International Inc
EAT
40.00
Shake Shack Inc
SHAK
32.50
Cracker Barrel Old Country Store
CBRL
37.50
Top Twenty
33.63
Total Sector
33.82
U.S. Crowded Avg
32.89
Our squeeze score overlays mark-to-market profit & losses to our crowded score to determine which stocks or sectors have higher squeeze risk than others. The restaurant sector is not a very squeezable sector with an average 36.35 squeeze score versus the market average of 38.19.
But CAVA is a very squeezable stock with a 100/100 squeeze score. Although shorts have been profitable in December, they are also down -$35 million in thirty-day mark-to-market losses, -9.44%. These losses coupled with high stock borrow costs, trade exit risk with higher-than-average days-to-cover make it a very squeezable stock if its stock price trends higher.
Restaurant Sector Squeeze Score
Ticker
Squeeze Score
McDonald's Corp
MCD
27.50
Chipotle Mexican Grill Inc
CMG
27.50
DoorDash Inc
DASH
47.50
Starbucks Corp
SBUX
22.50
Restaurant Brands Intl
QSR
40.00
Darden Restaurants Inc
DRI
35.00
Domino's Pizza Inc
DPZ
27.50
Yum! Brands Inc
YUM
22.50
Wingstop Inc
WING
45.00
Cava Group Inc
CAVA
100.00
Yum China Holdings Inc
YUMC
-
Aramark
ARMK
25.00
Texas Roadhouse Inc
TXRH
20.00
Dutch Bros Inc
BROS
55.00
Papa John's International Inc
PZZA
52.50
Bloomin' Brands Inc
BLMN
57.50
Cheesecake Factory Inc
CAKE
62.50
Brinker International Inc
EAT
60.00
Shake Shack Inc
SHAK
32.50
Cracker Barrel Old Country Store
CBRL
47.50
Top Twenty
35.58
Total Sector
36.35
U.S. Squeeze Avg
38.19
CAVA’s December 12th lockup expiry may make the stock much more shortable. If insiders sell in size, which is a strong possibility with its +48% move above its $22 IPO offer price, stock loan availability may increase significantly if shares land in accounts which either lend their shares or are marginable and their shares are rehypothecated by their brokers.
It might take a week or so for shares to settle and the smoke to clear after the surge of post lockup trading, but stock loan availability will increase, stock borrow rates will get cheaper and short sellers who were standing on the sidelines will get into the game.
There is a strong possibility that selling of previously locked-up shares coupled with new short side selling may drive CAVA’s share price downward, especially if buy-side demand has already been sated after six months of post-IPO trading. Next week should be volatile for CAVA short sellers – more so if the number of short sellers increase along with its stock loan supply.
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