Palantir Becomes Short Sellers' Biggest Pain Point with $5 Billion in Unrealized Losses

According to the latest data from S3 Partners, Palantir Technologies Inc. has become the biggest pain point for short sellers amid the market rebound, with short sellers across the market facing pressure.

The firm tracks a basket of stocks scoring 70 or higher on its 0-100 squeeze index, meaning conditions are ripe for shorts to be forced to cover. Currently, 24 stocks qualify for the basket, which is up 13.4% month-to-date, putting broad pressure on short sellers.

Palantir's Unusual Position

Palantir's short interest has now reached $12 billion. This is the largest dollar short position in the basket, far above its average of $3.37 billion. The stock is also the biggest gainer in the group, up 41.4% month-to-date, with shorts facing the largest unrealized losses at $5 billion. S3 Partners' short interest tracking shows that despite the rising share price, short positions against Palantir have generally continued to increase, exacerbating these unrealized losses. However, the position accounts for only 3% of the float, giving the stock the lowest crowding score in the basket at 32.5.

Few short sellers are involved, but those that are picked the wrong direction.

Growing Unrealized Losses

The basket's recent unrealized losses total approximately $15 billion, with nearly two-thirds concentrated in just three stocks. Palantir accounts for $5 billion, followed by Lumentum Holdings Inc. at $3.1 billion and Super Micro Computer Inc. at $1.3 billion.

These three stocks are also the basket's biggest gainers, each up more than 34%.

Squeeze Index

S3 Partners builds its squeeze index on top of a separate crowding score, which uses dollar short size, stock borrow liquidity, trading volume, and short positions to assess how tight short positions are. The squeeze index then adds rising stock borrow costs and unrealized losses, as these factors typically force short sellers to cover.

Palantir's predicament fits the basket's broader pattern, where the average squeeze index has now reached 80.8.

Fox Corp., Workday Inc., and Super Micro all hit the highest reading of 100.

S3 Partners' head of research, Leon Gross, summarized the dynamic: a rising market is like a tide that lifts all boats—and all squeeze indexes.

Most Crowded Short Positions

Charter Communications Inc. and Fox have the highest crowding scores at 85 and 80, respectively, followed by EchoStar Corp. and Skyworks Solutions Inc. at 77.5 each, versus an average of 62.0. S3 Partners' tracking shows Charter Communications' short position accounts for 50.40% of its float, the highest in the basket.