Fitbit has had a rough go of things as of late. The stock tumbled 75% in 2016 amid an increasingly competitive market for wearable devices.

In November, the company slashed its earnings per share (EPS) guidance for the crucial holiday quarter to a just a quarter of what analysts had been expecting. More recently, Bloomberg News reported that inventories may be piling up, citing an analyst at Cleveland Research. The analyst also said the company’s suppliers have halted production.

So, perhaps not surprisingly, traders have been piling into bets that the stock will fall further. Short interest has exploded in the opening days of 2017, increasing by 16.3%, according to a report sent out by S3 Partners on Friday. “Short sellers have added more than 20 million shares over the first two weeks of 2017, bringing the total amount of shares on loan to close to 50% of float,” the firm wrote. So far, those bets look like they might be late to the party. Shares of Fitbit have managed to hold their own at the start of the new year. The stock is actually higher by 1.9% in 2017 despite the big increase in short interest.

Fitbit reports its fourth-quarter results – the one for which it has already slashed forecasts- on February 21, so these traders do face a big risk: Since Fitbit’s already taken the step of warning that things are going to be bad, and given that so many investors have lined up to profit from a bigger drop, any inkling of good news could actually lead to a huge rally in the form of a so-called short squeeze.

Fitbit

Foto: source S3 Partners