The most shorted stocks on the ASX: Everything you need to know this week

With the world reopening and international travel once again on the cards, you’d think a company like Flight Centre would be getting a lot of love from consumers, professional investors and pundits alike. And while its share price has truly soared since the beginning of the year (it’s up more than 48% in 2023), short interest in Flight Centre remains stubbornly high. 

For those not in the know, short sellers benefit when a stock’s share price sinks. These fund managers will “borrow” shares in a company at the current market price, and will buy the shares back (close out their positions) once the share price has fallen (if it does) at a later date. The difference between that initial price and the later buyback price would be a fund manager’s profit. 

A word to the wise, the maximum profit an investor can make from “shorting” a stock is 100%, as a stock’s share price can’t go below $0. Theoretically, a long position’s profit could be far more than 100%. Just as the downside on a short position could be far more than 100% (think GameStop, yikes!). 

Each week, Market Index will be following the ASX’s most shorted stocks to dissect any major trends or changes. It’s also worth noting that a large increase or decrease in a company’s short position can be an early indicator of changing sentiment on a stock, so we will be running our eyes over that data too. 

The data used below is four days behind, as reporting is not mandatory until three business days post-trade. The data below refers to short interest changes for stocks between April 24 and May 5. 

The most shorted stocks on the ASX 

Interesting observations 

This week, we’ve seen a shuffling of the most shorted stocks on the ASX. For example: 

• Flight Centre is still the most shorted stock on the ASX. 

• Megaport dropped from the 2nd most shorted stock on the ASX to the 10th. 

• Jervois Global’s short interest increased by 0.79%. It is now the 3rd most shorted stock on the ASX. 

• Pointsbet lifted back up onto the list and is now the 6th most shorted stock on the ASX. Its short interest increased the most this week, up 1.21%. 

• JB Hi-Fi fell from the list. Its short interest is now 7.11%. 

What else do you need to know? 

As you may have read last week, Megaport shares rallied 41.7% on Friday, 28 April after upgrading its FY23-24 guidance. The stock is still down nearly 14% year to date. Given the stock is up nearly 32% since the announcement, short sellers may have had to close their positions to avoid further losses, particularly given many fund managers have stop loss policies in place. 

Another interesting thing to note, some of these stocks have experienced double digit rallies over the past month alone. Pointsbet, for example, is up 50% over the past month, while Core Lithium and Flight Centre are both up 15%. Similarly, Jervois Global has seen its share price rise 17%. 

The only stocks that would have profited short sellers over the last month are Zip (down more than 8%), Temple & Webster (hardly though, it’s just down 1%) and AMA Group (down 42%). 

What happened to AMA’s share price? Well, on April 17, AMA Group downgraded its guidance for FY2023 from $70-90 million to $60-68 million. Not great for long shareholders, but great for the short sellers. 

Rising shorts

Interesting observations 

Despite Pointsbet’s share price soaring 50% over the past month, short interest continues to rise in the stock. Over the past week, short interest increased 1.21%, with nearly 9% of Pointsbet’s shares on issue now shorted. 

Battery material-related stocks continue to make their way onto short sellers blacklists, with Magnis Energy, Jervois Global, Pilbara Minerals and Syrah Resources seeing their short interest rise over the past week. 

Tech and growth names, as well as one non-bank financial (Iress) and one housing-related company (Wagners) also saw their short interest tick up over the period. 

Falling shorts 

Interesting observations 

Well, it turns out short sellers did close out some of their short positions in Megaport over the week, with short interest in the stock falling more than 3% during the week. 

Similarly, biotech small-cap Mesoblast saw its short interest fall 3% during the week. That’s likely because the company released its quarterly activities report on April 28. Since then, its share price has risen nearly 27%. The company now has US$88.8 million in cash on its balance sheet after a US$40 million private placement. In addition, the FDA has accepted Mesoblast’s submission for approval of remestemcel-L - a treatment for steroid-refractory acute graft versus host disease for children.

There are also quite a few speccy names that have seen their short interest fall over the past week - so could this be a turning point for these stocks? We’ll just have to wait to find out.