Shorts are back: Lyft, Rackspace & Owlet all targeted this week
Weekly Wrap Up: Sunday, July 26, 2026
If you needed a sign that short selling is having a moment, this was the week for it. CNN ran a feature on how shorts are suddenly back in fashion, noting that short positions hit a record high in June as the nearly four-year AI rally began to wobble and semiconductor names slid almost 20% from their peaks. The Financial Times, meanwhile, gave an episode of its Story of Money podcast to Jesse Livermore, the trader who shorted the 1929 crash and turned skepticism into a fortune. And in a fitting bookend, a New Jersey court ordered Nikola founder Trevor Milton to cover the legal bills of CNBC and Hindenburg Research after his defamation suit against them collapsed, a reminder of how often the short seller is eventually vindicated. Against that backdrop, three fresh reports landed this week. Bleecker Street Research went after Lyft over undisclosed litigation liability, The Equity Dispatch questioned Rackspace Technology's debt load, and Shortfinder's models flagged Owlet, with all three stocks finishing the week lower. We also published our 1H 2026 Activist Short Selling Report, a look back at the busiest six months the space has seen in years.
- Shortfinder flagged Owlet, Inc. (OWLT) in its systematic short rankings. Stock closed the week down 6.2%.
- Bleecker Street Research targeted Lyft, Inc. (LYFT) alleging it has failed to disclose or accrue for an estimated $1.3 to $2.7 billion in sexual assault litigation liability its balance sheet cannot cover. Stock closed the week down 3.1%.
- The Equity Dispatch targeted Rackspace Technology, Inc. (RXT) alleging a shrinking legacy business is hurtling toward a cash cliff against more than $2.4 billion in debt maturities, per the public preview of the report. Stock closed the week down 2.0%.
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New Activist Reports
| Metric | Price | Change |
|---|---|---|
| Close (Day Before) | $5.60 | — |
| Low (Report Date) | $5.53 | -1.2% |
| Close (Report Date) | $5.64 | +0.7% |
| Close (End of Week) | $5.25 | -6.2% |
Stock Price Impact
Owlet shares barely flinched on the day Shortfinder's flag appeared. Having closed at $5.60 the session before, the stock dipped to an intraday low of $5.53 on July 20, a decline of just 1.2%, and actually recovered to finish the day slightly higher at $5.64, a gain of 0.7%. That muted immediate reaction is typical of a quantitative screen, which rarely carries the shock value of a detailed written exposé. The selling came later. By Friday's close the shares had drifted down to $5.25, leaving Owlet 6.2% below where it started the week. The pattern suggests the market took its time digesting the flag rather than reacting on the spot, with weakness accumulating over the following sessions instead of arriving in a single dramatic move.
About the Report
Shortfinder listed its research on Owlet, titled "Shrinking Hardware Behind a Wall of Insider Resale Stock," as free-tier content, but the findings unlock only after signing in to the platform. Because the public listing carries no preview, there is no accessible summary of the report's specific claims to relay here. The full write-up is available at no cost once you create a Shortfinder account (sign in to Shortfinder).
Read the Full Report Summary →
| Metric | Price | Change |
|---|---|---|
| Close (Day Before) | $14.66 | — |
| Low (Report Date) | $13.49 | -8.0% |
| Close (Report Date) | $14.02 | -4.4% |
| Close (End of Week) | $14.20 | -3.1% |
Stock Price Impact
Lyft saw real volatility the moment Bleecker Street Research published. Having closed at $14.66 the prior session, the stock sank to an intraday low of $13.49 on July 23, an 8.0% drop that showed investors taking the litigation thesis seriously. It clawed back ground into the close, finishing the day at $14.02, down 4.4%. From there the damage moderated. Shares recovered modestly to end the week at $14.20, a 3.1% loss from the pre-report close. The partial rebound suggests the market is weighing a genuine but uncertain tail risk rather than pricing in Bleecker Street's full liability estimate, an understandable stance given that the allegations hinge on litigation outcomes that will not be resolved for months.
About Lyft, Inc.
Lyft is the second-largest ridesharing company in the United States, connecting riders with independent drivers through its app-based marketplace. Headquartered in San Francisco, it holds roughly 24% of the domestic rideshare market against Uber's 76%, and unlike its larger rival it earns revenue almost entirely from a single product, with no meaningful delivery, freight, or advertising business to lean on. In the first quarter of 2026 the company reported revenue of $1.65 billion and a narrow GAAP operating loss, with modest net income supported largely by interest income rather than operations. Since 2025 Lyft has leaned into acquisitions to grow, adding FreeNow, TBR Global, Gett UK, and Serveo's bike contracts, and it has since sold off its autonomous-vehicle division. The company carries roughly $1.7 billion in unrestricted cash and investments.
Key Points from the Report
- According to Bleecker Street Research, Lyft has failed to disclose or accrue for an estimated $1.3 billion to $2.7 billion in sexual assault litigation liability, omitting any mention of Multi-District Litigation No. 3171 or a quantified legal reserve from its last five filings, including its FY2025 10-K and Q1 2026 10-Q.
- The report alleges that this exposure dwarfs the company's balance sheet: its base-case estimate of $1.9 billion exceeds Lyft's $1.7 billion in unrestricted cash and investments, and the firm identifies no specific sexual assault reserve among the company's $533 million in combined legal and tax accruals.
- Citing interviews with two former Lyft employees and multiple insurance executives, the report contends that third-party coverage effectively excludes rideshare sexual assault claims, leaving Lyft to bear the full cost. One former manager told Bleecker Street, "The insurance is all for traffic safety, auto accidents. Sexual assault incidents, that is completely separate. The insurance doesn't cover that."
- Bleecker Street points to a bellwether trial set for September 30, 2026 and an August 17 document-production deadline as near-term catalysts, arguing that Lyft is following the blueprint of Uber, whose comparable litigation grew from 79 cases to roughly 3,940 federal cases in under three years.
Read the Full Report Summary →
| Metric | Price | Change |
|---|---|---|
| Close (Day Before) | $4.02 | — |
| Low (Report Date) | $3.90 | -3.0% |
| Close (Report Date) | $3.94 | -2.0% |
| Close (End of Week) | $3.94 | -2.0% |
Stock Price Impact
Rackspace shares slipped but held relatively steady after The Equity Dispatch published on July 24. The stock had closed at $4.02 the prior session, touched an intraday low of $3.90, a 3.0% decline, and closed the day at $3.94, down 2.0%. With the report landing on the final trading day of the week, there was little time for a larger move to develop, and the shares ended the week exactly where they closed on report day, at $3.94. The contained reaction may reflect that much of the thesis, centered on Rackspace's debt load and a recent equity raise, was already weighing on a stock that had fallen sharply earlier in July. The market's fuller verdict on J Capital's argument will take more sessions to play out.
About Rackspace Technology, Inc.
Rackspace Technology is a cloud computing provider whose core business sells contracted cloud and managed-hosting services to an established base of enterprise customers. According to the Activ8 brief, that legacy operation is contracting across the measures that matter most, including revenue, customer count, and remaining performance obligations. In May 2026 the company signed a Memorandum of Understanding with AMD to build what it describes as a governed Enterprise AI Cloud, a capital-intensive new line that, per the report preview, has yet to be attached to any revenue contract. The preview frames Rackspace as effectively running two businesses at once: a shrinking legacy book that still generates cash, and a new AI-infrastructure buildout that consumes it, all while the company services a substantial debt load.
Key Points from the Report
- Per the public preview of the report, J Capital Research argues that Rackspace faces more than $2.4 billion in debt principal maturities through 2028 and, given a weak credit rating, is unlikely to refinance on favorable terms, leaving it in the report's phrase "hurtling toward a cash cliff."
- The preview notes that a highly beneficial interest-rate swap in place since February 2021 has recently expired, setting interest expense up to rise, even as the report considers self-funding from operating cash flow unlikely to close the gap.
- According to the preview, Rackspace stock rose more than 200% last May on its AMD Memorandum of Understanding, which J Capital characterizes as covering new equipment to establish a business line with no revenue contract behind it, resting on a foundation of weakening legacy revenue.
- The preview points to Rackspace's July 9, 2026 launch of an At-The-Market program to issue up to $250 million in stock, alongside a downward revision to full-year guidance, after which shares fell roughly 25% in a day. J Capital believes further dilutive raises are inevitable.
The full report is available to The Equity Dispatch subscribers (subscribe here).
Read the Full Report Summary →
Activ8 Newswire
Shorts are back in fashion on Wall Street - Short interest hit a record high in June as confidence in the nearly four-year AI bull market wavers and semiconductor stocks retreat almost 20% from their peaks, pushing a long-maligned corner of the market back into the spotlight. Source: CNN Business
The trader who made $100 million shorting the 1929 crash - The Financial Times devotes an episode of its Story of Money podcast to Jesse Livermore, the legendary speculator whose contrarian bets made and lost several fortunes and whose story still shapes how traders think about betting against the market. Source: Financial Times
Nikola founder ordered to pay short seller's legal fees - A New Jersey court ordered Trevor Milton to cover roughly $581,000 in legal costs for CNBC and Hindenburg Research after his defamation suit over their Nikola reporting was dismissed under the state's anti-SLAPP law. Source: ZeroHedge
