Rising short interest in a stock can suggest that investors are betting against the future stock price of that company.
One restaurant stock has seen a surge in the number of shares short in 2026, which comes during a potential buyout. Data suggests a short squeeze could be cooking up.
Here's what that means for investors.
Short Sellers Take on Wendy's
Fast food stock Wendy's Co. (NASDAQ: WEN) has struggled over the past year with turnaround efforts. That could explain why short sellers are pouncing on the stock.
Data from S3 Partners says short interest has hit 54 million shares of Wendy's, an increase of 94% year-to-date.
This increase puts the long/short ratio at 1.1x for Wendy's stock with 60 million active long shares and 54 million active short shares. For S3, which is well-known for tracking short interest, this puts Wendy's in "battleground territory."
Data shows that the borrow cost is 5.88% on Wendy's with a borrow utilization rate of 92%. S3 shows a Squeeze Score of 100 out of 100, suggesting a potential short squeeze could happen if Wendy's stock gets some good news or catalysts to send shares higher.
Benzinga Pro shows 34.1% of the Wendy's float is currently short.
Take Private Deal Could Burn Shorts
A recent report from the Financial Times said Nelson Peltz's Trian Fund is working on funding to take Wendy's private. Peltz and Trian own around 16% of Wendy's stock and have two seats on Wendy's board of directors.
Trian has a history of activist activity with Wendy's dating back more than 20 years.
News of the potential buyout wasn't enough to spook short sellers, according to S3 Partners. While Wendy's shares went up 17% on news of the potential buyout, short sellers added 3.9% more shares.
This means that short sellers are likely betting that a deal does not happen.
Declining sales have hurt Wendy's and short sellers are betting the trends will continue. Wendy's posted a double beat for the first quarter, beating analyst estimates for both earnings per share and revenue. This marked the fourth straight double beat, suggesting things could be improving for the restaurant company.
Trian has said that Wendy's is "undervalued" and the consideration for a takeover offer could suggest putting its money where its mouth is.
With 16% ownership, Trian is looking to international investors to help fund a deal for Wendy's, which has an enterprise value of around $5 billion.
While takeover activity has been picking up in the restaurant sector due to lower valuations, there is no guarantee that investors will back the Trian takeover attempt.
With Wendy's shares down significantly over the past five years, particularly in the last year, current shareholders may be willing to sell at a low premium.
For short sellers, the bet is that things get worse for Wendy's and that the buyout doesn't go through. A buyout offer could send shares higher and see shorts needing to cover or face a short squeeze on the significant amount of the float that is short.
Likewise, Trian announcing that it is no longer considering a buyout or is selling its Wendy's stake could see shares drop significantly and short sellers win from their bet.
Wendy's Stock Price Action
Wendy's stock trades slightly down 0.26% at $7.60 on Friday versus a 52-week trading range of $6.37 to $12.51. Wendy's stock is down 6.4% year-to-date in 2026 and down 33.5% over the last year.