Short sellers double bet on Weight Watchers as Oprah invested $43 million

Short sellers double bet on Weight Watcher International as its shares doubled after the influential celebrity Oprah Winfrey invested for the company.

The lending data from SunGuard's Astec Analytics shows, as reported on Reuters, that borrowing in Weight Watchers shares rose 25%.

The short sellers  borrow Weight Watchers' shares and sell them, hoping to buy them back later for less to return to the lender.

Recently Oprah Winfrey invested $43 million for the 10% stake for the company and will receive options to acquire an additional 5%. Winfrey will be a director of the company as well as its spokeswoman.

Weight Watchers' shares doubled after the partnership was announced, earning Oprah more than $40 million on paper in a day.

Oprah also join the board of Weight Watchers.  The company provides weight management services, operating globally through a network of company-owned and franchise operations.

Weight Watchers' service offers a meeting-based system, an online plus plan without meetings and an online plan with personal coaching but no meetings.

However, the company carries a lot of debts which greatly affects the stock price to a change in outlook.

Before saved by Oprah,  the Weight Watchers' earnings had been under pressure and the stock price fell. The company was trading in a distressed territory because the market expected sales continue to fall. Trading at nearly $30  year ago, shares dipped below $4 this summer.

Weight Watcher's total revenue fell 19% from $1.84 billion to $1.48 billion between 2011 and 2014. The brand has been losing subscribers. In March, Weight Watchers's subscribers down a fifth from a four-year high.

But after Oprah's investment, the company experienced its busiest trading day in corporate history as over 71 million shares hands on USA stock exchanges.

The company now trades at 29 times expected earnings. In comparation, its rival Nutrisystem trades at 21 times earnings.

Oprah invested to Weight Watchers, as reported on Seeking Alpha, to give the company additional credibility to stand out  further in the competitive environment. The investment is also to refresh the brand.

Oprah was not only taking a big position in the stock, she also promised to do joint marketing and branding projects, according to Economy and Markets. Oprah has given the company to use her image in its advertising for five years.

The short sellers buy the company's shares to cap the losses. Those purchases led to the rise in the stock's price.

Weight Watchers' shares moved from $6.79 to $15.75. While its Enterprise Value increased by 21%.