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The stock market has staged an impressive rally as 2023 gets underway with the S&P/TSX Composite Index climbing by nearly 7 per cent over the past 30 days.

Although there are classic signs of impending recession – such as inverted yield curves and contractionary readings in the U.S. purchasing managers’ index for manufacturing – some investors seem to have bought into the optimistic view encouraged by developments such as falling inflation and the shedding of stringent pandemic controls in China (which improves prospects for an upturn in global growth).

Leading the recent rally, however, are heavily shorted stocks. The 20 stocks with the highest percentage of float short, for example, have appreciated more than 21 per cent in the past month. Year-to-date gains in the Toronto Stock Exchange may thus be getting a boost by a short squeeze that is pressuring short sellers to close out their positions.

The 20 most shorted companies by percentage of float (Jan. 25)

Canada Goose HldgsGOOS-T26.8%22.8%
Canopy Growth CorpWEED-T24.9%17.1%
iShares S&P/TSX 60 ETFXIU-T22.8%5.7%
Lion Electric CoLEV-T18.8%34.9%
Aurora Cannabis IncACB-T18.0%8.1%
Zymeworks IncZYME-Q16.5%22.1%
Purpose Bitcoin ETFBTCC.B-T15.5%37.4%
Energy Fuels IncEFR-T15.5%12.8%
Ballard Power SystemsBLDP-T15.2%28.8%
Invesco S&P 500 Eq Wt ETFEQL/F-T15.1%5.3%
Pan American SilverPAAS-T13.9%11.2%
Briacell Therapeutics CorpBCT-T13.1%57.3%
Hut 8 Mining CorpHUT-T12.9%129.1%
Frontera Energy CorpFEC-T12.8%10.1%
Tucows IncTC-T12.8%9.4%
Home Capital Group IncHCG-T12.8%-0.2%
Lithium Americas CorpLAC-T12.4%6.9%
Li-Cycle Holdings CorpLICY-N11.3%25.0%
I80 Gold CorpIAU-T10.9%-3.1%
E Automotive Inc.EINC-T10.9%24.2%

Source: S3 Partners

Some analysts think the short squeezes could continue a while longer. Take Canada Goose Holdings Inc. (GOOS-T), which has emerged this month as the most heavily shorted stock on the TSX with 26.8 per cent of its float sold short, according to S3 Partners data.

The maker of the iconic brand of parkas and winterwear suffered erosion in its margins last year due to inflationary cost pressures but now that COVID-19 controls have been lifted in China, Canada Goose is positioned for “an expected recovery from sales in Asia,” argues BOOX Research analyst Dan Victor on He expects the stock price to be a third higher in a year, as “the shorts should be looking to close their short bets on the company as the outlook for sales and earnings accelerates.”

Companies with a high percentage of float short are particularly at risk of turning into, or extending, short squeezes if the cost for a short seller to borrow their shares is high. On the 20 most-shorted list, the following securities had high costs to borrow: Lion Electric Co. (17.9 per cent), Purpose Bitcoin ETF (16.6 per cent), Briacell Therapeutics Corp. (31.2 per cent) and Hut 8 Mining Corp. (29.4 per cent).

Activist short sellers

When activist short sellers take positions in stocks, they publish bearish research reports on the targeted companies. According to data firm Breakout Point, there were eight such reports on Canadian companies in 2022, compared to 12 in 2021.

Canadian companies targeted by activist short sellers in year to Dec. 31, 2022

Saputo SAP-TSpruce Point11/29/2022-2.3-40
Air Boss of AmericaBOS-TOSS Research9/8/2022-54-50
AZZ Smart TechnologiesAZ-TWhite Diamond5/11/2022-50-50
Reliq Health TechnologiesRQHF-TWhite Diamond4/14/2022-38na
Emerita ResourcesEMO-TGrizzly3/29/2022-76-89
Li-Cycle HoldingsLICY-TBlue Orca3/21/2022-43na
Zentek Ltd.ZTEK-TNight Market8/22/2022-42-100
Standard LithiumSLI-THindenberg2/3/2022-59.4na

Source: Breakout Point

Globally, there were 113 activist short seller reports, with 77 of them focused on U. S. companies. There were also bearish bets in Europe (12), China (8) and other countries (8).

The 113 short positions worldwide were down an average -31 per cent after the release of activist short sellers’ reports. The average decline in the 8 stocks targeted in Canada was 46 per cent, the most of any country and considerably more than the Toronto Stock Exchange’s decline of 6.2 per cent in 2022.

Most expensive stocks to borrow

Since short sellers need to borrow a stock before they can sell it short, another indicator of short-seller sentiment is the cost to borrow shares. A stock with a high cost to borrow usually means that short sellers are bearish on the company. If the cost is extremely high, short sellers might feel pressure to buy back shares and return them to the lender. Here are the Canadian companies with the highest rates, according to

Most expensive stocks to borrow in Canada (as of Jan. 25)

Cruz Battery Metals CorpCRUZ-T163.6%
ESE Entertainment IncESE-T141.7%
Mountain Boy Minerals LtdMTB-T125.1%
Lexagene Holdings IncLXG-T96.0%
Atmofizer Technologies IncATMO-T80.2%
Freeman Gold CorpFMAN-T78.5%
Amex Exploration IncAMX-T76.0%
Theratechnologies IncTH-T70.8%
DMG Blockchain Solutions Inc DMGI-T70.4%
Fire & Flower Holdings CorpFAF-T70.1%
Minco Silver CorpMSV-T65.3%
Empress Royalty CorpEMPR-T63.5%
Betapro Inverse Bitcoin ETFBITI-T62.8%
Nervgen Pharma CorpNGEN-T59.4%
Uge International LtdUGE-T58.5%
Resverlogix CorpRVX-T57.9%
Ximen Mining CorpXIM-T56.2%
Hemostemix IncHEM-T55.8%
Millennial Precious Metals CMPM-T55.7%
Aftermath Silver LtdAAG-T55.0%
Cybeats Technologies CorpCYBT-T54.3%


Largest one-month increases in short positions (30 days to Jan. 25)

Canadian Natural Resources LtdCNQ-T$1,066,418,73724.4%6.15%
TC Energy CorpTRP-T$732,270,72018.2%8.18%
Enbridge IncENB-T$709,053,57513.5%5.28%
Shopify IncSHOP-T$644,317,17435.3%4.44%
Bank of Nova ScotiaBNS-T$359,826,2998.0%5.83%
iShares S&P/TSX 60 ETFXIU-T$308,660,87013.9%22.79%
Wheaton Precious MetalsWPM-T$270,818,32321.9%5.50%
Cameco CorpCCO-T$265,263,53142.1%5.78%
Power Corp CanadaPOW-T$193,977,64916.6%7.44%
Royal Bank of CanadaRY-T$170,059,4304.6%2.06%
Restaurant Brands IntlQSR-T$160,998,23720.4%3.54%
Canada Goose HoldingsGOOS-T$157,291,07459.7%26.75%
Bank of MontrealBMO-T$155,486,0905.5%3.30%
Natl Bank of CanadaNA-T$143,772,2538.4%5.54%
Algonquin Power CorpAQN-T$139,616,27732.0%8.63%
Ritchie Bros AuctioneersRBA-T$137,879,05227.4%7.05%
Magna IntlMG-T$121,706,52622.4%2.87%
Franco-Nevada CorpFNV-T$114,898,89913.0%2.69%
iShares MSCI Canada ETFEWC-N$108,248,11231.5%8.64%

Source: S3 Partners

Largest one-month decreases in short positions (30 days to Jan. 25)

Shaw Communications IncSJR-B-T($452,788,985)-38.1%4.10%
Suncor EnergySU-T($418,386,825)-13.0%4.63%
Imperial Oil LtdIMO-T($256,840,160)-22.7%6.64%
Lululemon AthleticaLULU-Q($255,712,116)-18.6%2.38%
Tourmaline Oil CorpTOU-T($177,990,864)-21.7%3.01%
BMO S&P 500 ETFZSP-T($154,112,573)-92.9%0.12%
Sun Life FinancialSLF-T($148,654,170)-13.6%2.46%
Waste ConnectionsWCN-T($135,305,101)-17.3%1.46%
Brookfield CorpBN-T($133,492,343)-12.8%7.14%
Arc Resources LtdARX-T($110,643,219)-24.1%3.33%
BCE IncBCE-T($105,560,852)-4.9%3.62%
BMO S&P/TSX Eq Wt Banks ETFZEB-T($92,093,908)-45.0%3.61%
Telus CorpT-T($90,514,155)-5.4%3.93%
Barrick Gold CorpABX-T($86,992,295)-4.3%4.32%
Agnico Eagle MinesAEM-T($60,586,702)-4.7%3.62%
Yamana Gold IncYRI-T($60,288,888)-39.2%1.19%
West Fraser Timber CoWFG-T($55,423,365)-38.6%1.64%
Ovintiv IncOVV-T($54,900,131)-7.8%3.81%
Cenovus EnergyCVE-T($50,950,954)-3.7%3.81%
Vermilion EnergyVET-T($46,737,573)-25.9%3.93%

Source: S3 Partners

Methodological notes

1) Some short positions may reflect, in part or whole, hedging/arbitrage positions – so they are not entirely bearish bets.

2) Short positions in inter-listed stocks were summed across exchanges in Canadian dollars.

3) When an investor purchases stock that was sold by a short seller, it creates a synthetic long position; if these long positions are not included in the float count, the percentage-of-float-short metric can be overstated – however, most of the time, the magnitude is not significant.

4) The percentage of float short for ETFs is impacted by the ETF mechanism for creating/redeeming units, which results in almost daily changes in the number of units issued. As a result, the percentage of float short for ETFs may be more volatile than for stocks.

Larry MacDonald also writes at Investing Journey

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/02/24 3:59pm EST.

SymbolName% changeLast
Canada Goose Holdings Inc
Canopy Growth Corp
Ishares S&P TSX 60 Index ETF
Lion Electric CO [The]
Hut 8 Corp
Briacell Therapeutics Corp

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