Is this the end of the wire for RadioShack?

Shares are down more than 7% amid a mysterious rush of bearish activity. 'The sharks are starting to circle,' one trader says.

By MSN Money Partner Jan 7, 2014 2:05PM
People walk past a RadioShack store in Manhattan on July 26, 2012 in New York City (© Mario Tama/Getty Images)By Kaitlyn Kiernan, The Wall Street Journal

An unusual rush of bearish activity in RadioShack Corp. (RSH) options suggests some investors are betting on a fresh leg down for the beleaguered stock, traders say.


On a day with no apparent news on the retailer, options trading volume jumped to nearly six times the daily average Monday, with 81% of trading in bearish put options, according to options-data firm Trade Alert. 


That notched the busiest day of trading in the Fort Worth, Texas, company's bearish options since July, when reports surfaced that the company had hired bankers to fix its balance sheet.


"The trading looks pretty bleak," said Henry Schwartz, the president at Trade Alert. "It looks like the sharks are starting to circle and put on some bets that see a strong chance of the stock collapsing," he said.


Steady trading in put options led the stock lower Monday. In recent trade, it was off 9 cents, or 3.4%, at $2.56. Heavy trading in bearish options can push a stock price down when brokers on the other side of the trade sell shares to hedge their position on the bullish side of that trade. Shares fell an additional 8 percent Tuesday, then recovered slightly in the afternoon to a 7 percent loss.


RadioShack shares have struggled over the past three years. After trading as high as $23.86 in 2010, the shares fell for more than two years, reaching a low of $1.91 in November 2012. Last year, the stock began to recover, reaching as high as $4.19 in May and September before sliding back to current levels.


On Monday, the most active options included January $2 put options, February $1.50 puts and April $1.5 puts. In the largest single trade in the January contract, an investor paid $6,912 for the right to sell 172,800 shares of RadioShack -- or about 10% of the company's daily average stock volume -- for $2 a share through Jan. 15.


The February and April $1.50 puts secure the right to sell shares at that price through Feb. 21 and April 18, respectively. A drop below $1.50 would mark a new low for the shares.


With the shares already trading so low, it looks like investors "are expecting RadioShack to soon file for bankruptcy," said Michele Skupp, senior options strategist at Miller Tabak. "With earnings coming up, there is a lot of speculation," she said. RadioShack is next expected to report earnings on Feb. 24.


RadioShack didn't immediately respond to requests for comment.


And it isn't just the options that have seen a jump in bearish activity. The number of shares on loan to short-sellers, or investors who borrow stock and sell it in the belief they will be able to buy it back later at a lower price later, has risen to a 17-month high. As of Monday, 30.3% of shares were on loan, according to Markit data.


More from The Wall Street Journal


Tags: RSH
241Comments
avatar
When I was a teenager I could walk into radio shack and buy electronic components. They make a token attempt at keeping them in stock now, but the people behind the counter don't know the difference between a transistor and a diode.
Jan 7, 2014 2:48PM
avatar
The name Radio Shack conjurs up a time past when if you needed an item in the electronic area there name came up first. Just last month I needed a replacement cell phone charger, went to R.S. 1st. no luck  walked nxt door Target, had universals that had the adapter I needed. 20.00 sale R.S. did not get. Seem to have lost track of there core business
Jan 7, 2014 3:00PM
avatar
I hope not!  Heavens, where will I now go to pay $500 for a 2 foot USB cable?
Jan 7, 2014 2:43PM
avatar
Haven't shopped at RadioShack in years because they have gotten far away from what they used to be so they might as well fold. By the way I now get the stuff and more that RadioShack used to sell online at better prices. 
Jan 7, 2014 2:53PM
avatar

I know its anecdotal.  When I was young I loved Radio Shack and spent a fortune in there.  In a single isolated incident 20 years ago a store manager for absolutely no reason refused to accept my personal check, and made his position loudly in front of a store load of customers.  Radio Shack and I parted ways.  That was it for me.  Amazing, but it doesn't take a lot to lose great customers.  But it was a symptom of things to come. 

Jan 7, 2014 3:27PM
avatar
I remember the days when they wanted your name, address, phone#, rank, serial # Etc. just to make a simple cash purchase. That didn't go over too well with the public. The Shack isn't what it used to be. The last couple times I was in our local one, the gum snapping young woman behind the counter was as clueless as she looked. They used to have some fairly knowledgeable folks working there and reasonable pricing. That's gone south.
Jan 7, 2014 2:59PM
avatar
I used to like them, but the last few times I've gone into the store the employees were rude, unsure of where anything was, seemed confused about what it was I was looking for (even though I had a printout from their own website which SHOWED what I was looking for) and were more interested in chatting it up with their friends at the front counter.  Also, on more than one occasion, the website told me a specific store had a specific item in stock, but that turned out to be untrue and I wound up making the trip for nothing.  Since I don't have a car, that was a major hassle.
avatar
I remember back in the old days [disco take one] when it was a good store. Most of the employees were psuedo electronic engineers geeks... They carried all of the parts and kits people wanted back then.

Now if you dont want an overpriced cell phone forget it. The people working the stores think Ohms law is a religious chant and Tesla is a soft drink name.

But its partly the shoppers now too. Nobody wants to solder a circuit board kit and build their own cell phone... And if one breaks they replace it.

Radio Shack tried to somewhat change with the times but they just went in the wrong direction.


Jan 7, 2014 2:32PM
avatar

radio shack such a crappy over priced place. there are several stores near me

every time I go there I NEVER SEE Any one buying their over priced worthless

crapp.. watch my words in 2 yrs most if not all of radio shack stores will be OUT.OF BIZ.

Jan 7, 2014 2:34PM
avatar
If they can't turn a profit on their ridiculous prices then they might better fold up their tent.
Jan 7, 2014 3:42PM
avatar
It's time for them to pack it in. I recently wanted to clean up and organize the wiring behind my entertainment center, so I went to RadioShack for zip ties. Not only did they not have them, but no one in the store even knew what they were! When I described what I was looking for, one of them finally said "OH, those things. Why don't you just go to Home Depot?" I couldn't believe it. I'm a former RS employee so every now and then I try to give them my business, but all they do is disappoint. This company is done.
Jan 7, 2014 2:43PM
avatar
used to work there  ...worst people i ever met...may they rot in hell...the cell phone thing i knew would bring them down
avatar
Radio Shack has never been price conscientious and merchandise is usually old school.  I wouldn't buy a 9volt battery from them.  I can't believe their still in business.
Jan 7, 2014 3:15PM
avatar
If you have shopped at Radio Shack recently you know why they are failing. I have had several very poor experiences with the Machesney Park IL store. They are frequently out of what I need. The sales people are rude and have no knowledge of the products at all. About a week ago I was in the store for 45 minutes. There were more sales people than customers in the store. But none of them offered to help. None of them even spoke to me. They were all too busy discussing personal problems with one another. One of the girls was coughing constantly and I was glad she didn't try to wait on me. She shouldn't have been allowed to be there spreading germs on everyone in the store. I finally left without making a purchase. Radio Shack sure isn't what it used to be.
Jan 7, 2014 3:04PM
avatar
I'd hate to see them go away. One of the last places to go for a lot of the items they sell. Not to mention a good part of my youth so many years ago was spent in those stores.
Jan 7, 2014 2:56PM
avatar
Radio Shack sucks any way. Go ahead and go out of bussiness. Your high prices is what did it and crappy stuff. Bye bye Radio Shack,
Jan 7, 2014 3:13PM
avatar
Lets see where to begin? Radio Shack has no revelance in 2014. This company started out as a radio/hobbist supplier. As that market died out it never was competitive with the tv's cell phones and battieries it sells today. People now order electronic stuff from the "giants" such as digikey. The last time I needed capicators for my samsung tv power supply radio shack didn't have them but could get it in about a week. At a cost of $2.95 each. I got it the next day from digikey for .99 cents a piece. And a better capicator to boot. I will never miss them when they go bust.
Jan 7, 2014 3:23PM
avatar
Lasrt time i was in their stores was 15 years ago. Didn't buy anything, everything was over priced. Still is.
Jan 7, 2014 2:37PM
avatar

ONLINE and china mart/walmart is killing many many other stores and businesses

in almost every field and products. as much as I freakin hate china mart/walmart

no 1 can beat their freakin prices.

Jan 7, 2014 3:07PM
avatar
I always found the store handy to obtain parts and supplies. I would never think about making a major purchase there.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

113
113 rated 1
279
279 rated 2
416
416 rated 3
647
647 rated 4
548
548 rated 5
513
513 rated 6
669
669 rated 7
516
516 rated 8
317
317 rated 9
113
113 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
KOGKODIAK OIL & GAS Corp10
UPLULTRA PETROLEUM Corp10
TAT&T Inc9
COPCONOCOPHILLIPS9
DVNDEVON ENERGY CORPORATION9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.