SmileDirectClub sell-off gives short sellers reason to grin

Traders short selling SmileDirectClub had a lot to smile about on Wednesday, earning paper profits of over US$115 million as the online dental company's stock plummeted 26per cent following a disappointing quarterly report.

During the previous session ahead of SmileDirectClub's quarterly report, short bets against it climbed to a record high 40,000 shares, equivalent to 57per cent of the company's float, according to S3 Partners, a financial analytics firm.

For 2020, SmileDirectClub forecast sales between US$1 billion and US$1.10 billion, the mid-point of which was below market estimates, and it reported a wider-than-expected fourth-quarter loss. The company reported US$318.5 million in cash at the end of the fourth quarter, down from US$547.6 million in the prior quarter. Given SmileDirectClub's cash burn, it may need additional capital sooner than expected, which could be an overhang on the stock, Jefferies analyst Brandon Couillard wrote in a research note.

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