The numbers are in and it appears that short sellers betting against CrowdStrike Holdings Inc. had a field day last Friday. 

The cybersecurity giant’s software update went disastrously wrong, causing a global IT outage and sending its shares gasping for air—the worst drop since November 2022.

This 11% plunge led to short sellers raking in paper profits amounting to $461 million, according to S3 Partners LLC.

And the story is far from over considering that today, CrowdStrike’s shares are continuing to dip by another 13%, boosting the short sellers' gains even further. 

Analysts have been quick to downgrade their ratings and slash price targets, adding to the company’s woes. Guggenheim’s John DiFucci just downgraded the stock to neutral, citing the outage as a potential hurdle for new deals in the near future. Despite this, he’s still hopeful about the company’s long-term potential—if you’re patient enough to wait it out like you’re in line at the DMV.

Scotiabank is singing a similar tune, calling the outage a "black mark on a previously unblemished record" and dropping their price target from $393 to $300. Ihor Dusaniwsky from S3 notes that short selling in the systems software sector, where CrowdStrike is second only to Microsoft, has surged by nearly $12 billion this year. It’s like a bear market buffet, and short sellers are gorging themselves.

The fallout from CrowdStrike’s blunder isn’t just a Wall Street spectacle; it’s wreaking havoc across various industries. Delta Air Lines, for example, is having a rough weekend, canceling over 600 flights by early Monday due to system failures tied to the outage. With summer travel at its peak, this is the worst possible timing. Stranded passengers are fuming, and Delta’s CEO Ed Bastian is in full crisis management mode, trying to restore order.

Across the pond in the UK, healthcare services are still in chaos. Doctors’ offices and pharmacies are dusting off their old pens and paper to manage prescriptions and appointments. This just goes to show how one technology failure can send us back to the dark ages in a split second. 

At the time of this writing, Crowdstrike is down over 12% but I’ll continue to update you as this story unfolds.

Stock.News has positions in Microsoft.