Titan Machinery (TITN) shares are capitulating. Titan’s share price has already hit a new four year lows today. The share price has been down by as much as 8% or by $1.10 today to $13.50 as compared to yesterday’s closing price of $14.60.
I believe that there are two catalysts that are driving and will continue drive Titan’s share price lower until it files for bankruptcy due to its having a business and revenue model that has never generated any positive operating cash flow. An existing catalyst that I mentioned in my August 4, 2014 report is the price of a bushel of corn. Today CNBC announced that a bushel of corn had traded to a new four year low of $3.50 per bushel. That is 10% below the 7/31/14 price of $3.80 that I cited in my most recent report. CNBC also reported that the US Department of Agriculture had announced that the record corn crop in the US will be less than it had previously forecasted. This is very bad news for Titan since the total amount that the farmers will have to spend due to their having less bushels of corn will be reduced even further.
The new catalyst is that data on the short interest in Titan’s shares was released by NASDAQ after last night’s (8-11-14) close. The data revealed that short interest as of July 31, 2014 increased by approximately 220,000 shares as compared to its short interest as of July 15, 2014. What this means is that instead of short sellers covering or buying the shares back in the open market after Titan’s share price had declined significantly the short sellers are selling more shares at the current price. Also, the maximum number of shares that were short had come down from approximately 7.0 million in December of 2013 to as low as 4.8 million last month. This means that there are approximately 2.2 million shares that are easily available to short sellers to short additional shares.
The increase in the open interest for Titan’s shorted shares over the most recently reported 15 day period suggests that the short seller will be ready to increase their positions or sell more shares when the company reports its earnings in early September. This reduces the probability that the share price will temporarily go up due to short covering when Titan announces results for its second quarter ended July 31, 2014 in early September. Titan Machinery’s share price had increased on the days that the company had made its two most recent earnings announcements due most likely to short covering.
The psychology has definitely changed for Titan Machinery and the institutional investors who hold 119% of all of the shares in its float. The company’s institutional investors can no longer count on short sellers covering or buying back the shares that they had shorted at much higher prices. The institutions need the short sellers to be buying their shares back instead of selling more shares short so that they can get out of their Titan holdings in an orderly fashion.
What is even worse for Titan’s institutional investor holders is that the average daily trading volume of its shares as of July 31, 2014, fell to 121,850 shares. It’s the lowest level over its last 12 months and is down significantly from Titan’s highest average daily volume of 777,156 shares which was recorded in December of 2013.
I am reiterating what I said in my August 4, 2014, report and it is that I believe that Titan Machinery will be in “bankruptcy by October 31st at the latest”.
Titan Machinery has been on my radar screen ever since it had been diagnosed multiple times by StockDiagnostics.com as having “The EPS Syndrome”. It’s a Financial Statement or Cash Flow Statement disorder that I discovered and named following my performance of an autopsy on Enron after it filed for bankruptcy. I had also discovered that there were more than 100 companies prior to Enron including Sunbeam which had un-expectantly filed for bankruptcy after it had been afflicted with The EPS Syndrome.
To learn more about The EPS Syndrome and the well-known companies who went out of business after being diagnosed as having it including Lehman Brothers, there is a four minute video below titled “Titan Machinery is a Perfect Short” that I recommend.
Additional information on the EPS Syndrome and Perfect Short Research™ is available at www.onlinefinancialsector.com.