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For the month ending April 25, short sellers’ bearish sentiment on the direction of the Toronto Stock Exchange was largely unchanged, as proxied by the short position in the iShares S&P/TSX 60 ETF (XIU-T) ending at the same $2.5-billion level that it began the period. There was an increase in the number of XIU units sold short, but it was offset by a drop of 3.5 per cent in XIU’s price – so the short position remained the same.

Short sales at the sector level

At the sector level, short selling can be tracked via exchange-traded funds (ETFs), which are now available from data-analytics firm S3 Partners. Let’s take at look at some of their analyses at this level of aggregation.

In the list of top 20 short positions, the energy, financial and cryptocurrency ETFs were well represented. Short positions in the energy ETFs hovered around 10 per cent of float, as did the Horizons US Dollar and CI Global Infrastructure Private Pool ETFs. The Bitcoin and Ether ETFs were quite far above 10 per cent of float.

Top 20 short positions in sector ETF by dollar value (April 26)

TICKERSHORT POSITION ON APRIL 26 ($MIL)
iShares S&P/TSX EnergyXEG-T$172.1
BMO S&P/TSX Equal Weight BanksZEB-T$166.2
BMO Laddered Preferred SharesZPR-T$49.8
CI Global Infrastructure Private PoolCINF-T$39.6
iShares Canadian Corporate BondXCB-T$36.2
CI Galaxy EthereumETHX.B-T$36.2
iShares S&P/TSX Capped REITXRE-T$35.9
Sprott Physical Uranium TrustU.U-T$35.8
BMO S&P 500ZSP-T$28.1
BMO Equal Weight Oil & GasZEO-T$26.3
BMO MSCI EAFE Hedged To CadZDM-T$22.8
Purpose BitcoinBTCC.B-T$22.4
iShares Core S&P 500XSP-T$17.7
iShares S&P/TSX Capped FinancialsXFN-T$14.9
iShares Canadian Government BondXGB-T$12.7
BMO Equal Weight UtilitiesZUT-T$12.1
BitcoinEBIT-T$12.0
Horizons US DollarDLR-T$11.6
BMO Equal Weight REITsZRE-T$8.1
EtherETHR-T$6.8

Source: S3 Partners

As for the table of top 20 ETF short positions by percentage of float, cryptocurrency ETFs were amply represented, claiming a quarter of the spots. Indeed, the Ether and Bitcoin ETFs occupied the first and second highest positions, with the percentage of their floats sold short (Version A) at 71.4 per cent and 53.4 per cent, respectively.

Top 20 short positions in Canada by percentage of float (April 26)

TICKER% of FLOAT SOLD SHORT - A% of FLOAT SOLD SHORT - B
EtherETHR-T71.4%41.7%
BitcoinEBIT-T53.4%34.8%
Purpose Credit OpportunitiesCROP-T20.7%17.2%
Mackenzie US Agg Bond C$QUB-T20.6%17.1%
iShares S&P/TSX 60XIU CN18.9%15.9%
Betapro Nat Gas 2x Daily BullHNU-T18.8%15.8%
CI Global Infrastructure Private PoolCINF-T14.3%12.5%
BMO Equal Weight Oil & GasZEO-T13.1%11.6%
iShares S&P/TSX EnergyXEG-T10.3%9.3%
Horizons US DollarDLR-T9.3%8.5%
CI WisdomTree Intl Quality Dividend GrowthIQD-T9.1%8.3%
CI Galaxy EthereumETHX.B-T8.6%7.9%
Dynamic Active Inv Grade Floating RateDXV-T8.4%7.7%
BMO S&P/TSX Equal Weight BanksZEB-T7.9%7.3%
iShares Core S&P/TSX CappedXIC-T5.4%5.1%
CI Yield Enhanced Short Term Agg BondCAGS-T4.9%4.7%
BMO MSCI EAFE Hedged to C$ZDM-T4.7%4.5%
Purpose BitcoinBTCC.B-T4.7%4.4%
Purpose EtherETHH.B-T4.6%4.4%
Fidelity Int Value IndexFCIV-T4.5%4.3%

Source: S3 Partners

S3 Partners calculates a second version (Version B) of the percentage of float for stocks and ETFs, which come out lower – for example, the Ether and Bitcoin ETFs is at 41.7 per cent and 34.8 per cent, respectively. It is useful to highlight how this version differs from Version A and why it might be the preferred version.

When a stock or ETF is sold short, it becomes a synthetic long position in the hands of the investor who bought from the short seller (the real long position is held by the investor who loaned out his shares). If the synthetic long positions are added to shares outstanding, we get Version B of the percentage of float short; if they are not added in, we get Version A.

Version A can lead to anomalies such as a stock appearing to have more than 100 per cent of its float short, as happened with GameStop Corp. in 2021. By basing the float instead on the sum of actual and synthetic long positions, Version B cannot be accused of inflating the percentage of float short – and accordingly may represent a more accurate picture for some observers.

Short sales at the company level

At the company level, the Short sales on the TSX column presents the Canadian trades of activist short sellers at the end of each quarter. For the first quarter of 2022, Breakout Point GmbH reported four cases, compared to two in the first quarter of 2021. All four shorted stocks are down, by an average of approximately 16 per cent.

The 4 Canadian companies targeted by activist investors in Q1

COMPANYRELEASE DATE IN QI/2022SHORT SELLER
Standard Lithium Ltd.SLI-TFeb. 2Hindenberg Researh
Zentek LtdZTEKMar. 8Night Market Research
Li-Cycle Holdings Corp.LICYMar. 24Blue Orca Capital
Emerita Resources Corp.EMOMar. 29Grizzly Research

Source: Breakout Point

For the S3 Partners’ table listing the 20 companies with the largest short positions as a percentage of float, many of the same companies from previous months appear on this month’s update. Of note, Air Canada (AC-T) once again led the way, with 30.0 per cent of its float sold short. This is the ninth month in a row that the company has been at, or near, the top of the list. Air Canada and many other regulars have been discussed in past columns.

Top 20 short positions by percentage of float (April 25)

COMPANY % OF FLOAT SOLD SHORT
Air CanadaAC-T30.0%
Canopy Growth Corp.WEED-T25.6%
Lion Electric Co.LEV-T22.6%
Meta Materials Inc.MMAT-Q19.7%
iShares S&P/TSX 60 ETFXIU-T19.3%
Briacell Therapeutics Corp.BCT-T18.0%
Energy Fuels Inc.EFR-T15.7%
Tilray Brands Inc.TLRY-T15.0%
Aurora Cannabis Inc.ACB-T14.5%
CI Global Private Pool ETFCINF-T14.3%
Canada Goose HoldingsGOOS-T14.2%
Sierra Oncology Inc.SRRA-Q13.5%
BMO Equal Weight Oil & Gas ETFZEO-T13.1%
Ballard Power SystemsBLDP-T12.9%
Sundial Growers Inc.SNDL-T12.4%
Dirtt Environmental SolutionsDRT-T12.3%
Hexo Corp.HEXO-T12.2%
Bitfarms Ltd.BITF-T11.9%
Hut 8 Mining Corp.HUT-T11.8%
Bellus Health Inc.BLU-T11.7%

Source: S3 Partners

One relatively new face on the table is CI Global Private Pool ETF (CRGE-T). This fund invests in companies with exposure to infrastructure around the world; earlier this month, it merged with a mutual fund with a similar portfolio. Also relatively new to the table is Sierra Oncology Inc. (SRRA-Q), a late-stage biopharmaceutical company that received a takeover bid earlier in April, and Bellus Health Inc. (BLU-T), a clinical stage biotechnology company developing solutions for the treatment of chronic cough disorders.

The top 20 increases in short positions by dollar value (April 25)

COMPANY 1-MONTH INCREASE IN SHORT POSITION ($MIL)
TC Energy CorpTRP$1,374.8
Canadian Natural ResourcesCNQ$338.7
Cenovus EnergyCVE$203.9
Telus Corp.T$192.4
CIBCCM$141.4
Fortis Inc.FTS$140.6
Intact Financial Corp.IFC$139.0
Manulife FinancialMFC$123.8
Fairfax FinancialFFH$115.1
Power Corp.POW$109.2
Pembina Pipeline CorpPPL$101.8
Imperial Oil LtdIMO$96.8
Keyera CorpKEY$90.6
Baytex Energy Corp.BTE$88.8
GFL Environmental Inc.GFL$80.6
Arc Resources Ltd.ARX$80.1
Lululemon AthleticaLULU$74.6
Intertape Polymer GroupITP$74.6
Shaw Communications Inc.SJR.B$60.1
Magna InternaionalMG$59.4

Source: S3 Partners

Larry MacDonald can also be found at Investing Journey.

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