Cineworld, Metro Bank and Sainsbury’s are among the UK’s most shorted stocks, new analysis has revealed, as rising interest rates couple with a slower Covid recovery in some footfall-reliant sectors.
The most-shorted company is Cineworld, which has had a rough ride during the pandemic after it was forced to close it 9,518 cinema screens during lockdowns.
Investors continue to swoop on Cineworld, with 9.2 per cent of its stock currently shorted against it – up from 7.5 per cent in July, according to research shared exclusively with City AM by ETF provider Granite Shares.
New Holland Capital LLC holds the largest short position with 2.42 per cent of the company’s shares out on loan, as it did in July as well.
However, the second most-shorted UK stock is currently embattled gold mining company Petropavlovsk PLC, with four funds collectively holding 6.9 per cent of its stock and betting on the share price to fall.
Less a reflection of the entire gold mining sector, investors are likely pouncing on Petropavlovsk after years of shareholder feuds culminated in its co-founder Pavel Maslovskiy being ousted as CEO by UGC and a group of other shareholders at its AGM last year. Pavel was then arrested in Moscow in December last year, charged with fraud.
Short sellers place bets on stocks that they expect to fall in price. Investors pay a fee to borrow shares in a company and then sell them with the aim of buying them back and then returning them to the lender.
Companies in precarious situations, or companies suspected of having a bloated valuation, tend to be shorted more than others. Short sellers often bet against high-quality stocks that they believe have risen too far, too fast, and underperforming stocks that they believe may have critical underlying problems.
In third place, commercial landlord Hammerson, which owns some of Britain’s biggest shopping centres including London’s Brent Cross, has 6.3 per cent of its stock currently shorted against it by six separate investment firms.
Metro Bank and Sainsbury’s were also ranked amongst the top ten, with short positions of 3.7 per cent and 3.5 per cent respectively.
And when it comes to the fund managers holding the most short positions on UK listed companies, GLG Partners comes out on top with 23, according to the analysis. They were followed by Marshall Wace LLP, Blackrock’s UK arm, JP Morgan’s UK arm and Ennismore fund management, with 21, 21, 9 and 9 short positions respectively.
“Shorting stocks is no longer the exclusive pursuit of institutional investors, as sophisticated individual investors are now increasingly doing this,” said Will Rhind, Founder and CEO of GraniteShares.
Rhind pointed to the platform’s short single stock exchange-traded products (ETPs), favoured by sophisticated retail investors, that had seen particular interest in big US tech names such as Tesla, Uber and Apple lately.
“Worries about rising interest rates have had an impact on more growth oriented tech names presenting a potential opportunity for some sophisticated investors seeking to take advantage of price declines over recent weeks.”