GameStop Sequel? Maybe Not, But fuboTV Has Epic Short Squeeze Potential

Posted on: January 28, 2021, 12:13h. 

Last updated on: January 28, 2021, 01:22h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Streaming sports provider fuboTV (NYSE:FUBO) could potentially be another battleground for aggressive retail traders following the kerfuffle in GameStop (NYSE:GME) and some other heavily shorted stocks.

FUBO stock
A GameStop store, seen here. With GameStop all the rage, traders are looking for other short squeeze ideas. fuboTV could be one. (Image: CNBC)

Names such as GameStop and movie theater chain AMC Entertainment (NYSE:AMC) are epicenters of battles between retail traders and their professional counterparts, including hedge fund managers. Via the Reddit forum WallStreetBets?or WSB in social media parlance, traders supposedly banded together to drive up the price of moribund video game retailer GameStop.

Due to the fact that the stock was heavily shorted, some traders with bearish positions in the name covered part or all of those trades, in turn running GameStop stock higher. That’s known as a short squeeze. Data from S3 Partners, an analytics firm specializing in short sales information, indicate fuboTV could be primed for a squeeze of its own.

Just two days ago, the streaming sports service and aspiring sportsbook operator had the sixth-largest short percentage relative to its total float 54.46 percent. That was the equivalent of $1.21 billion, according to S3 data.

In just 48 hours, that figure dramatically increased.

Earlier today, S3 Managing Partner Ihor Dusaniwsky’s short interest in FUBO stock is now $1.70 billion, or 67.08 percent of the float, good for a 27 percent increase in two days. As the percentage of shares out on loan to bearish relative to its shares outstanding, fuboTV is now the second-most shorted name in the US, behind only GameStop.

FUBO Stock: Plenty of Potential, Volatility

Beyond heavy short interest, GameStop and fuboTV don’t represent an apples-to-apples comparison. For several years, the retailer was seen as an ailing name, as video game sales moved to download models. The bearish view on the stock was bolstered by the coronavirus pandemic. The health crisis forced the closures of malls — home to many GameStop stores — across the country.

Conversely, fuboTV’s status as a streaming company puts it in the disruptive growth category — one investor finds it alluring. The firm’s sports focus keeps it away from direct competition with established, well-heeled names, such as Disney+ and Netflix. Moreover, fuboTV has designs on the fast-growing sports betting universe, recently purchasing sportsbook operator Vigtory.

Though FUBO stock is lower by six percent today, the name could make life uncomfortable for short-sellers. As more states legalize sports wagering and professional leagues look for new, high-tech broadcast partners, fuboTV stands to benefit.

The name is also one that can subject bearish traders to rip-your-face-off rallies. Over the past week, it’s up 55 percent, and over the prior 90 days, the upside is 240.50 percent.

fuboTV, a Different Situation

One of the primary reasons the GameStop scenario is grabbing so much attention is it’s a quintessential David vs. Goliath story. Supposedly novice traders teamed up to teach Wall Street a lesson.

A short-covering rally in fuboTV, assuming such a situation comes to pass, won’t be rooted in that element of populism. That’s because the streaming company is supported by some well-known pros.

For example, David Einhorn recently revealed his Greenlight Capital was an early fuboTV investor, and he sees a bright future for the company where it can differentiate itself from, rather than directly compete, with traditional sportsbook operators.

In part, the hedge fund manager’s bullish view on fuboTV — one that could make shorts squeamish — revolves around a new form of higher engagement sports wagering. Einhorn envisions a future in which gamblers will be able to bet on specific outcomes within a game.

Say whether or not an NFL kicker will make a field goal or whether a pitcher’s next throw will be a ball or strike. He argues that fuboTV is positioned to capitalize on that form of wagering, making the company more akin to the in-game purchasing model used by video game companies, not an old guard sportsbook