This cannot be what the bears were hoping for.
QVC parent Liberty Interactive announced their intention to acquire online retailer Zulily on Monday at a price of $18.75, which represented a 49 percent premium to the stock's Friday closing price. The shares of Zulily promptly rose to that exact level, closing Monday trading a penny below it.
The big losers here are the many traders short the stock. According to FactSet, some 27 percent of the Zulily shares available for trading are held short. That's substantially above the short interest for fellow online retailers like Overstock (8.5 percent short) or Amazon (1.3 percent).
Shorting a stock is the opposite of buying a stock; instead of buying now and planning to sell later at higher prices, a trader who shorts a stock sells now and hopes to buy it back later at lower prices. Needless to say, the mechanics are a bit more complicated, as a short seller must borrow those shares from an investor who holds them.
Shorting is often considered risky, due to the potential downside involved. After all, an individual who buys a stock knows precisely how much she could lose—the amount that she paid—because a stock's price can't fall any lower than zero. But a stock could theoretically rise to infinity, meaning that an individual who is short has no way of gauging how large here losses could be.
When it comes to those short Zulily, this sudden acquisition pretty much counts as a worst-case scenario.