Telecom services provider Frontier Communications (NASDAQ: FTR) has had a harrowing past few months. Its shares have plummeted by about 40% in value over the past quarter alone owing to deteriorating operating metrics and dividend cut fears. And making things worse for its shareholders, short interest in the company has spiked by a significant 15%, reaching its all-time highs, over the last reporting cycle alone. This doesn't come across as an encouraging sign for long-side investor participation and leads me to believe that Frontier's shares are still far from bottoming out. Let's take a closer look to have a better understanding of it all.
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The Data
Let me start by saying that short interest is basically an aggregate number of open short positions in a company, that are yet to be covered. A dramatic reduction of short interest usually indicates that traders are winding up their short positions due to the absence of significant bearish catalysts. In contrast, a sharp addition of short interest indicates that traders are rapidly accumulating short positions as they project a significant drop in the concerned company's stock price over the foreseeable future. So, the metric basically gives us insights about the general market sentiment relating to any publicly traded company.
