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.
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.
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.
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.
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.
Larry MacDonald can also be found at Investing Journey.
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