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Short Interest: Insurance brokers unmoved by DoJ case

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The latest short interest data was released earlier this week and unsurprisingly InsurTech names continued to lead the list.

Note that FINRA updated the short interest data on the US publicly listed stocks with the settlement date ending June 29. As a reminder, FINRA publishes the data twice a month – in the middle and end of every month – with an eight-trading day lag.

Short interest as a percent of float is a great indicator of current market sentiment. All else being equal, higher figures typically imply that investors are pessimistic on a firm’s valuation, fundamentals or are betting on some company-specific negative news to come out.

Like past reports, Root remains the highest shorted insurance stock with a short interest of 28.2% of its float, a 3.1pts change from two weeks ago. Note, Root has material private equity and insider ownership, limiting the public float versus more mature industry peers, which may skew the ratio to the upside.

Lemonade remains the second at 20.8% (up less than 1pt from two weeks ago), and Metromile ranks third at 20.6% (up 2pts from two weeks ago). HCI ranked fourth at 16.2% (up 1pt from two weeks ago) with the TypTap Insurance valuation continuing to face skepticism.

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Changes in short interest were relatively muted during the second half of June. With this report we also added the corresponding share performance for the group.

Despite the Aon-Willis DoJ case announcement last month, the brokers’ short interest movement was minimal.

Although modestly incremental, HCI and Metromile did see the biggest increase in short interest over a two-week period. The short interest movement aligned with HCI Group, Lemonade, and Mercury General’s large stock movements.

On the other hand, Root saw the largest decline. The stock also saw the largest stock price decline, which would allow the short positions to profit with some closing out.

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On a days to cover basis, it appears Greenlight Re’s days to cover decreased to 11.2 days from 18.8 two weeks ago, but still remains the highest among the companies we looked at. Aon’s days to cover continued to decline to 9.2 days, down from 19.2 days two weeks ago.

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Short interest for SPACs near negligible levels

SPACs have shown incremental changes in short interest this month. After seeing a spike two weeks ago, Hippo’s SPAC RTPZ short interest reverted to a near-negligible level. The short interest for SPACs currently searching for a target remained under 1% of float.

Note, SPAC shares are typically redeemable at ~$10 plus accrued interest, which serves as a floor for the price.

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