1. AI

Super Micro Was the Most-Shorted S&P 500 Stock in April. Why Shares Are Falling.

By Mackenzie Tatananni

 and Elsa Ohlen

Updated May 15, 2025, 10:01 am EDT / Original May 15, 2025, 5:42 am EDT

 Shares of Super Micro Computer 

SMCI

-1.96%

 have been on the rise as of late, boosted by a stream of good news. However, the rally appeared to be losing steam on Thursday.

Through the end of April, Super Micro was the most-shorted stock in the S&P 500 

SPX

+0.32%

 as a percentage of its float, according to Dow Jones Market Data. With 21.3% of its shares sold short, Super Micro came in above Moderna at 17.6%.

A look at historical data stretching back to 2010 reveals the stock was at its most-shorted in nearly a decade. Its sudden ascent since the beginning of the month has raised questions as to whether Super Micro is caught in a short squeeze.

A short squeeze occurs when the price of a stock rises unexpectedly instead of falling, forcing short-sellers to buy back shares to diminish their losses. This collective buying can drive up a stock’s price even further.

If this was the case, the squeeze appeared to be losing ground on Thursday as shares, trading under the ticker SMCI, slipped 3% to $43.65. The S&P 500 and Nasdaq Composite were down 0.3% and 0.7%, respectively.

The server maker logged its highest close since February at the end of Wednesday’s session, rising 16% to $45. This could be another driver behind the decline, as stocks commonly fall in the wake of big gains.

A wave of positive headlines earlier this week was also giving shares a boost. In addition to the cooling of trade tensions between the U.S. and China, SMCI received a lift after the company struck a $20 billion data-center deal with Saudi Arabia’s DataVolt and began shipping “a number of” high-powered servers.

Raymond James initiated coverage at Outperform on Tuesday. Analysts led by Simon Leopold dubbed Super Micro a market leader in artificial-intelligence infrastructure, with competitive pricing relative to peers.

Following the announcement of Super Micro’s partnership with DataVolt, Raymond James reiterated the rating and said the deal expanded visibility on Super Micro’s future shipments and related results.

Some 47% of analysts currently covering the stock now rate SMCI at Buy or the equivalent, while only 13% have a Sell-equivalent rating on the shares, according to FactSet. That’s an improvement from six months ago when only 25% rated the stock a Buy, while 25% recommended clients to Sell.

While Super Micro has reaped the benefits of the AI server boom and established itself as a key player in hyperscale deployments, shares have come under pressure in the past year.

Many analysts grew cautious amid an investigation by the Justice Department, questions about its accounting practices, and underwhelming quarterly results.

Shares peaked at the end of February after the server maker narrowly avoided delisting from the Nasdaq by filing delayed financial reports with the U.S. Securities and Exchange Commission.

“While not tied to fraud, the delay raised investor concerns and regulatory attention,” Raymond James noted Tuesday. While the company later resumed filings, “the event briefly affected its stock performance and transparency reputation.”

Super Micro said an independent investigation found no evidence of fraud or misconduct. However, auditor BDO USA 

Super Micro Stock Surges After Company Files Delayed Financials. ‘The Matter Is Now Closed,’ Company Says.

The AI server maker had faced a Feb. 25 deadline to avoid a delisting on the Nasdaq.

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expressed an “adverse opinion” that indicated the company’s internal control system wasn’t catching and preventing material errors in financial statements.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com and Elsa Ohlen at elsa.ohlen@barrons.com

Retail | Dick’s Sporting Goods to acquire Foot Locker for $2.4 billion in effort to corner Nike market

Retail

Dick’s Sporting Goods to acquire Foot Locker for $2.4 billion in effort to corner Nike market

Published Thu, May 15 20258:11 AM EDTUpdated 2 Hours Ago

 Key Points

• Dick’s Sporting Goods plans to acquire Foot Locker for $2.4 billion.
• Foot Locker has been undertaking an ambitious turnaround, but its weak stock price has made it a takeover target.
• The combined company will have a major competitive edge in the Nike sneaker market and will provide Dick’s access to international markets, plus a younger and urban consumer.

• Dick’s Sporting Goods said Thursday it plans to acquire rival Foot Locker as it looks to expand its international presence, win over a new set of consumers and corner the Nike sneaker market. 

  Under the terms of the agreement, Dick’s will use a combination of cash on hand and new debt to acquire Foot Locker for $2.4 billion. Foot Locker shareholders can receive either $24 in cash – a roughly 66% premium of Foot Locker’s average share price over the last 60 days – or 0.1168 shares of Dick’s stock.

• Foot Locker CEO Mary Dillon has been undertaking an ambitious turnaround at the footwear retailer, and while there have been signs of improvement, larger market conditions like tariffs and consumer softness have weighed on the company’s stock, making Foot Locker a potential takeover target. As of Wednesday’s close, Foot Locker shares were down 41% this year. 

  In a joint press release, Dillon said the acquisition is a “testament” to all of the work her and her team have done to improve the business.

  “By joining forces with DICK’S, Foot Locker will be even better positioned to expand sneaker culture, elevate the omnichannel experience for our customers and brand partners, and enhance our position in the industry,” said Dillon.

  The CEO added she was “confident this transaction represents the best path for our shareholders and other stakeholders.”

  While the companies are longtime rivals — both competing to sell the same brands in their stores — Dick’s is almost double the size of Foot Locker in terms of revenue. In their most recent fiscal years, Dick’s reported $13.44 billion in revenue, while Foot Locker saw $7.99 billion.

  Dick’s said it expects to operate Foot Locker as a stand-alone business unit within its portfolio and maintain the company’s brands – Foot Locker Kids, WSS, Champs and atmos. 

  Dick’s CEO Lauren Hobart said on a conference call Thursday that the two businesses will be run as separate entities and the consumer “may or may not know that Dick’s and Foot Locker are one.”

  “The combination of them for the consumer is not the most important thing, it’s making sure that there’s two powerful brands that are meeting all consumer needs, wherever, whenever, however they want to shop,” Hobart said.

  The merger brings together two iconic names in sports retailing and will give Dick’s a massive competitive edge in the wholesale sneaker market, most importantly for Nike products.

  Currently, Nike’s primary wholesale partners are Dick’s, Foot Locker and JD Sports. If the merger is approved, the combined company would be able to corner the Nike market at a time when the sneaker giant is more reliant on wholesalers than in years past. 

  “Dick’s Sporting Goods and Foot Locker are two of the most storied and respected brands in our industry and have been our valued partners for decades,” said Nike CEO Elliott Hill in a statement. “Each has their own loyal consumer following and deep understanding of the needs of athletes. I am confident that together, they will help elevate sport and continue to accelerate the growth of our industry.”

  The acquisition will also allow Dick’s to enter the international markets for the first time, as Foot Locker operates 2,400 retail stores in 20 countries, and gives it access to the type of consumer who doesn’t usually shop at its stores. The Dick’s customer tends to be affluent, suburban and older, while the Foot Locker customer is urban, younger and more likely to be lower and middle income. That latter customer has long underpinned sneaker culture and is critical for Dick’s to reach long-term growth and competitive advantage. 

  While Hobart said the company is not looking toward international expansion at this time, the total addressable market that Dick’s is operating in will grow from $140 billion to $300 billion due to Foot Locker’s global reach.

  The proposed combination raises considerable anti-competition concerns, but Wall Street expects President Donald Trump’s Federal Trade Commission to be more favorable to mergers.

  Hobart said during the call that the companies are “not expecting any regulatory concerns” with the FTC.

  Foot Locker shares soared more than 80% after the deal was announced Thursday. Shares of Dick’s fell roughly 15% as investors worried about the impact the merger could have on financial results.

  While Dick’s expects the transaction to be accretive to earnings in the first full fiscal year post-close, and to deliver between $100 million and $125 million in cost synergies, Foot Locker has been struggling for some time. It has a cumbersome store footprint, many of which are in malls, and it’s more exposed to economic downturns because of the lower-income level of its customer.  

  Foot Locker has assessed all of its stores and determined that some locations could close, Hobart said, but she does not expect a “significant” number of stores to shutter.

  In a note on Thursday, TD Cowen called the deal a “strategic mistake” as it downgraded shares of Dick’s to hold from buy. Analyst John Kernan said the transaction is “likely to produce low returns” and presents clear risks to synergies, integration and the structural foundation of Foot Locker’s business. Kernan expects the return on capital to be low and said it raises balance sheet risks.

  “There is little to no precedence of M&A at scale creating value for shareholders within Softlines Retail. In our view, there are countless examples of M&A destroying billions of dollars in value since we have covered the sector,” said Kernan.

  Dick’s Executive Chairman Ed Stack said the company knew there would be some initial skepticism in response to the merger, but stressed that the two companies are “highly confident” and “up for the job.”

  “We’re pretty conservative. We don’t have a lot of big egos here,” he said. “If we didn’t see this clear line of sight to this, or we thought that this was going to impact what we’re able to do with Dick’s, we wouldn’t be doing it.”

  Both companies preannounced fiscal first-quarter results after announcing the merger. Foot Locker reported comparable sales down 2.6% from the prior-year period, led by a slowdown internationally, and expects to see a net loss of $363 million for the period, compared with net income of $8 million in the year-ago period. That loss includes $276 million in charges related primarily to trademark and goodwill impairments.  

  Meanwhile, Dick’s said it saw comparable sales growth of 4.5% and earnings per share of $3.24.

  “We are very pleased with our strong start to the year and our demonstrated sustained growth,” said Hobart. “The strength of our business puts us in a great position for our proposed acquisition of Foot Locker — a transformative step to accelerate our global reach and drive significant value for our athletes, teammates, partners and shareholders.”

1. Retail

Foot Locker Stock Soars 85% on Buyout Deal. Why Dick’s Has Dropped 14%.

By Sabrina Escobar

 and George Glover

Updated May 15, 2025, 12:02 pm EDT / Original May 14, 2025, 5:37 pm EDT

Foot Locker FL +84.42% 

 stock skyrocketed Thursday after Dick’s Sporting Goods DKS -15.47%

 said it had agreed to buy the shoe retailer for about $2.4 billion. Dick’s investors are less sanguine about the merger, as they question whether undertaking an ambitious turnaround project will hurt, rather than help, an otherwise strong business.

Dick’s said in a press release that it had entered a merger agreement to buy Foot Locker at $24 a share, representing a nearly 90% premium to Foot Locker’s stock price as of Wednesday’s closing bell. Foot Locker shareholders also can choose to receive 0.1168 a share of Dick’s common stock for each share of Foot Locker common stock in lieu of the $24.

The deal would be accretive to earnings per share in the first full fiscal year after closing, and will deliver between $100 million to $125 million in cost synergies in the medium term, Dick’s said. Dick’s plans to finance the acquisition through a combination of cash and new debt. Both companies expect the transaction to close in the second half of 2025.

Yet despite expectations of future earnings stemming from the deal, Dick’s stock was down 14% Thursday morning, on pace for its largest percent decrease since its August 2023 disappointing earnings report, according to Dow Jones Market data. The benchmark S&P 500 

SPX

+0.23%

 was up 0.3%. Foot Locker shares surged 85%, on track for their largest percent increase on record.

It’s clear why Foot Locker shareholders are so ebullient. They’re getting a pretty good payout for a stock that hasn’t performed well for years. Foot Locker shares peaked at $79.20 on Dec. 8, 2016, and have since shed 70% of their value. Earnings seem to have peaked, as well, dropping from $7.77 in the fiscal year ending January 2022 to $1.37 in the year ended this January. Sales growth has been lackluster, outright declining in the last three fiscal years.

But those lackluster results are the same reason that Dick’s investors are nervous about the deal, in spite of the expected synergies. While Foot Locker has struggled, Dick’s has thrived. The shares have gained close to 200% since December 2016, and the company has seen steady improvement in profitability and market share gains.

“The key question that the market will contend with is whether the risk of DKS buying a struggling retailer is more than compensated by the accretion and synergies,” wrote Michael Lasser, an analyst at UBS. “Time will tell.”

TD Cowen analyst John Kernan downgraded Dick’s stock to Hold from Buy on Thursday, arguing that while the deal may be accretive to earnigns per share, the return on capital would be low and the risk to the company’s balance sheet rises. He would rather management focus on Dick’s current growth initiatives, such as the House of Sport or next generation sports, which he says were lower risk with a higher return on investments.

“There is little to no precedence of M&A at scale creating value for shareholders within softlines retail,” he wrote in a note Thursday. “In our view, there are countless examples of M&A destroying billions of dollars in value since we have covered the sector.”

John Zolidis, president and founder of Quo Vadis Capital, agrees, noting that he doesn’t see an “easy solution” to Foot Locker’s problems, which include shrinking market share and an over-reliance on Nike 

NKE

+0.32%

 sales. The deal, he writes, “invalidates the argument that DKS is deserving of a premium multiple based on consistency of performance and structurally higher margins.” Dick’s has a price to earnings ratio of about 15 times earnings, compared to Foot Locker’s 9.5 P/E ratio.

Indeed, valuation is a concern. Some detractors believe that Dick’s is paying too much for an ailing company.

And certainly a roughly 90% premium seems lofty, acknowledges Lorne Bycoff, co-founder & CEO of the Bycoff Group, a private investment firm that has long been bullish on Dick’s stock. But it doesn’t necessarily feel excessive, he said, a point that other bulls have made.

Foot Locker shares have been especially hard-hit by the potential tariffs on China and other Asian countries, which are the main manufacturers of sneakers and other footwear. The stock traded steadily above $20 for most of 2024, Bycoff pointed out, which may be a better reflection of the underlying value of the business.

In his view, Dick’s could be “taking advantage of a market opportunity” to get a beaten-down company that helps its long-term expansion goals at a reasonable price. One of Dick’s key growth strategies has been growing its footwear business. Footwear accounted for 28% of Dick’s’ total sales in fiscal 2024, up from 26% in 2023 and 24% in 2022.

Acquiring Foot Locker, one of the largest sneaker retailers in the U.S., could help Dick’s consolidate market share in the footwear space and grow its store footprint, giving the company an edge to compete at a bigger scale, Bycoff added. Foot Locker had about 2,400 stores across 26 countries at the end of 2024.

“They’ve got stores and a consumer we’re not going to get based on our real estate strategy,” said Edward Stack, Dick’s’ executive chairman, referring to Dick’s’ preference for larger, suburban-based stores. “We think there’s great financial merit here.”

Those that are favorable on the deal argue that cost synergies could help recover some of Foot Locker’s margins, and the combined company would have more scale to negotiate with vendors and landlords, wrote Needham analyst Tom Nikic. The deal, while surprising, “makes a great deal of financial sense for both parties,” he added.

It also provides a vote of confidence for other beaten-up retail stocks. The Foot Locker acquisition comes at the heels of sneaker-maker Skechers USA agreeing to sell itself to investment firm 3G Capital. The deal, valued between $9 billion and $10 billion, also commanded a hefty premium of about 30% to Skechers 15-day volume-weighed average stock price ahead of the deal’s announcement.

“With both private equity and strategic buyers showing up, it helps put a floor in some of these stocks,” wrote Paul Lejuez, an analyst at Citi.

Dick’s shareholders are just hoping the stock finds a floor soon, too.

Write to Sabrina Escobar at sabrina.escobar@barrons.com and George Glover at george.glover@dowjones.com

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May 15 2025 | Down volume