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Let’s take a look at short-selling activity on the Toronto Stock Exchange over the month to May 25. Short selling involves borrowing stocks and selling them on the expectation they can be returned at a lower price. Academic studies have found that stocks with large short positions tend to underperform, so investors holding such stocks might want to double-check their bullish thesis. S3 Partners ( provided data for this article.

Short sales at the market level

Short sellers were slightly less bearish on the direction of the TSX in May: there was a decrease in the short position of the iShares S&P/TSX 60 ETF to $2.2 billion as of May 25, a drop of 9.2 per cent from $2.4 billion on April 25. Less than half of the drop was due to a decline in the ETF price; the rest was due to short sellers closing out positions (trimming their market hedges).

Short sales at the sector level

The cryptocurrency sector attracted a lot of bearish interest, claiming a quarter of the spots on the Top 20 ETF short positions by percentage of float table. Moreover, the Ether and Bitcoin ETFs occupied the top two positions, with 84.4 per cent and 45.9 per cent of their float sold short, respectively. Bond and energy ETFs were also well represented on the table.

Top 20 ETF short positions by percentage of float

Mackenzie US Agg Bond CADQUB-T20.9%
iShares S&P/TSX 60XIU-T16.3%
BMO Eq. Wt. Oil & GasZEO-T12.3%
Horizons US DollarCCY-T11.6%
iShares Canadian Corporate BondXCB-T11.5%
iShares S&P/TSX Energy XEG-T10.6%
CI Galaxy Ethereum ETHX.B-T9.3%
BMO Global CommunicationsCOMM-T9.1%
Purpose BitcoinBTCC.B-T7.2%
BMO Consumer StaplesSTPL-T6.8%
Invesco Senior LoanBKL.F-T6.1%
Horizons Nasdaq 100HXQ-T5.9%
Betapro Natural Gas 2X Daily BullHNU-T5.8%
Purpose EtherETHH.B-T5.4%
iShares Core S&P/TSX CappedXIC-T5.3%
CI yield-enhanced Canada ST BondsCAGG-T5.3%
iShares S&P/TSX Small CapXCS-T4.9%
BMO S&P/TSX Eq. Wt. BanksZEB-T4.8%

Source: S3 Partners

Short sales at the company level

At the company level, Air Canada once again held the No. 1 spot on the Top 20 short positions by percentage of float table. Previous monthly updates have offered possible reasons for why Air Canada and other regularly appearing companies have elevated levels of short sales – for example, hedging of convertible securities.

Canada Goose Holdings Inc., which is attempting to expand into China, saw a notable increase to 18 per cent of float short. Other companies with significant increases were: Energy Fuels Inc., Aurora Cannabis Inc., Ballard Power Systems Inc. and Bellus Health Inc. Fresh faces were: Lithium Americas Corp., Hive Blockchain Technologies Ltd. and Victoria Gold Corp.

Top 20 short positions by percentage of float for companies

Air CanadaAC-T38.4%30.00%
Canopy Growth CorpWEED-T25.2%25.60%
Lion Electric CoLEV-T23.1%22.60%
Canada Goose HldgsGOOS-T18.0%14.20%
Energy Fuels IncEFR-T17.8%15.70%
Aurora Cannabis IncACB-T17.7%14.50%
Meta Materials IncMMAT-Q17.5%19.70%
iShares S&P/TSX 60 ETFXIU-T16.4%19.30%
Tilray Brands IncTLRY-T15.8%15.00%
Ballard Power SystemsBLDP-T15.6%12.90%
Briacell Therapeutics CorpBCT-T15.0%18.00%
Bellus Health IncBLU-T14.1%11.70%
Hexo CorpHEXO-T13.9%12.20%
Lithium Americas CorpLAC-T13.7%n.a.
Hut 8 Mining CorpHUT-T12.6%11.80%
Dirtt EnvironmentalDRT-T12.4%12.30%
BMO Eq Wt Oil Gas ETFZEO-T12.3%13.10%
Bitfarms LtdBITF-T12.0%11.90%
Hive Blockchain TechnologiesHIVE-T11.9%n.a.
Victoria Gold Corp.VGCX-T11.8%n.a.

Source: S3 Partners

Short positions inter-listed on U.S. and Canadian exchanges are combined in C$

The cost to borrow shares (not shown on the table) was quite high for five companies: Canopy Growth Corp. (24.2 per cent), Lion Electric Co. (16.6 per cent), Meta Materials (49.1 per cent), Briacell Therapeutics Corp. (19.6 per cent) and Hexo Corp. (36.1 per cent). This shows that the demand to borrow and sell their shares was extraordinarily strong, which augments the bearish signal provided by the percentage of float sold short.

However, if the cost to borrow gets too high, it could set off a rush to close out short positions, which could trigger an upward spike in price (cause a short squeeze). Another trigger for a price spike is low daily trading volumes relative to the size of the short position: two companies with high days-to-cover ratios are: Air Canada (127 days) and Dirtt Environmental (80 days).

Top 20 increases in short positions by dollar value (May 25)

Enbridge IncENB-T$2,197.9
Suncor EnergySU-T$806.3
Canadian Natural ResourcesCNQ-T$610.5
Bank of MontrealBMO-T$435.9
Cenovus EnergyCVE=T$433.1
TC Energy CorpTRP-T$432.3
Tourmaline Oil CorpTOU-T$369.9
Teck Resources Ltd BTECK.B-T$189.8
iShares MSCI Canada ETFEWC-N$161.7
Fortis IncFTS-T$150.4
Royal Bank of CanadaRY-T$147.0
Ovintiv IncOVV-T$136.1
Imperial Oil LtdIMO-T$123.0
Alimentation Couch tard IncATD-T$120.8
Nutrien LtdNTR-T$113.8
Agnico Eagle MinesAEM-T$100.9
Toronto-Dominion BankTD-T$99.0
CGI IncGIB.A-T$94.6
Brookfield Asset MgtBAM.A-T$88.5
First Quantum MineralsFM-T$85.8

Source: S3 Partners

Short positions inter-listed on U.S. and Canadian exchanges are combined in C$

On the Top 20 increases in short positions by dollar value table, many companies from the energy sector rank high. The percentage increases in their short positions over the month (not shown on table) were also notable, especially for: Enbridge Inc. (42.4 per cent), Suncor Energy (59.5 per cent), Cenovus Energy (42.7 per cent) and Tourmaline Oil Corp. (96.9 per cent). A good portion of the increases reflect sharp gains in energy stock prices.

The iShares MSCI Canada ETF, which tracks the Canadian stock market but trades on a U.S. exchange, registered the largest percentage increase in short position by dollar value: 105 per cent. TD Bank (1.6 per cent) and Royal Bank of Canada (5.3 per cent) recorded the smallest percentage increases.

Some methodological notes

Short positions in stocks inter-listed in U.S. and Canada were summed and expressed in Canadian dollars. Also, synthetic long positions were excluded from the stock floats. Lastly, the percentage of float short for ETFs is impacted by the ETF mechanism for creating and redeeming units, which results in almost daily changes in the number of units issued – so, the percentage of float short for ETFs may be more variable than the percentage for stocks.

Larry MacDonald can also be found at Investing Journey