Short Selling: A timely jump in Appen short interest, uranium shorts ease

Welcome back to the Short Seller Series – A recap of the most heavily shorted stocks on the ASX as well as those experiencing significant changes to short interest over the past week and month.

Short selling data is four days behind today's date because reporting is not mandatory until three business days after the trade. The tables below compare week-on-week (WoW % Chg) short interest changes between 9 and 16 January 2024 and month-on-month (MoM % Chg) changes between 6 December 2023 and 16 January 2024.

Before we dive in

I came across an interesting SMH article about 'Why it would be a dumb idea to ban short-selling'. Good perspectives but an incorrect explanation about how shorts work.

"Shorters cannot hold stocks indefinitely like long-only investors – they pay additional interest fees, and are exposed to infinite losses should a “short squeeze” occur."

In a high interest rate environment, shorters are receiving interest for their short positions. For example, if the cash rate is 4.0% and a CFD broker charges an additional financing margin of 2.0% then this would result in:

• Leveraged long positions are paying 6.0% pa (Cash rate plus financing margin)

• Short positions receive 2.0% pa (Cash rate minus financing margin)

If the cash rate was, for example 0.5%, then both long and short positions would be paying interest (assuming the same financing margin).

• Leveraged long positions are paying 2.5%

• Short positions are paying 1.5%

The most shorted stocks

Stocks with rising short interest

The rise in Appen shorts was rather timely, as the company announced the loss of a material customer, Google, on Monday, 22 January. Appen shares finished the session 40% lower to 27.5 cents. More broadly speaking, shorters continue to pile into beleaguered battery metal names.

Where are shorters covering

Uranium, retail and obliterated lithium names experienced a slight pullback in week-on-week short interest.