Short sellers double down on Weight Watchers after Oprah invests

Wed Oct 28, 2015 2:26pm EDT
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By Noel Randewich

SAN FRANCISCO (Reuters) - Bets against Weight Watchers International appear to have spiked after an investment by media mogul Oprah Winfrey led the troubled diet brand's shares to double.

Borrowing in Weight Watchers shares jumped 25 percent last week after the celebrity disclosed she was buying 10 percent of the company, according to lending data from SunGard's Astec Analytics, which provides a strong glimpse into short-selling activity.

Short sellers borrow shares and sell them, hoping to buy them back later for less to return to the lender.

A favorite of short sellers in recent years, Weight Watchers is suffering from a shift by consumers to free calorie-counting apps on smartphones as well as fitness tracking devices from companies including Fitbit.

News on Oct. 19 of Winfrey investing in Weight Watchers led its shares to rally 150 percent over five days, even as an upcoming quarterly report is expected to show a double-digit sales decline.

"Though the cash market seems to attribute paranormal stock-picking powers to Oprah, short sellers are seemingly more cautious," SunGard said in a report on Wednesday.

Weight Watchers now trades at 29 times expected earnings, pricey compared with rival Nutrisystem at 21 times earnings.

With active online subscribers down a fifth from a four-year high last March, Winfrey's frankness about her decades-long struggle with weight loss may help revive the brand.   Continued...

A sign for Weight Watchers is displayed at  office in lower Manhattan, New York October 19, 2015. REUTERS/Brendan McDermid