Short & Caught is Stockhead’s fortnightly recap of which ASX small cap stocks are heavily shorted. Stocks that are shorted have investors betting that they fall.

Shorting works by “selling” stocks you do not actually own in the hope of buying it back at a lower price.

Because shorting is restricted under Australian law, any substantial shorting of stocks is worth knowing about even if you own these stocks and only trade “long”.

Short interest

Short interest is the main measure by which Stockhead looks at shorting. Shorting is not a quick buying and selling activity, traders wait months to close out trades (especially if in the short term they are wrong).

This fortnight we have decided to look at stocks whose short interest has changed over 60 per cent in the last month – signifying recent activity.

Rare earths explorer Arafura Resources (ASX: ARU) has seen a 19,000 per cent increase in the short interest against it. After rising from 4 cents to 14 cents in six weeks it has fallen nearly 35 per cent in the last month after a capital raise. While its short interest is only $4.4 million, this has substantially increased in recent weeks.

Next is Strike Energy (ASX: STX) which has found 5,908 per cent more short interest against it. Recent days have proven the shorters wrong as gas results doubled the company’s share price last week.

Short interest against Macmahon’s Holdings (ASX: MAH) is up 842 per cent. This company has fallen 30 per cent since February. In recent days the company is expanding by acquiring GBF Group for $48 million.

It expects earnings this year to be $70-$80 million but we are yet to see the final figures and have been given no guidance on next year’s earnings.

Millennium Minerals (ASX: MOY) are another miner likewise being shorted. This company’s trade is gold which has had a solid 2019. But since hitting the magic A$2,000 an ounce mark it has stagnated.

Millennium expects 34,716 ounces produced in the last half year.

Health stocks have not been forgotten by shorters. The short interest against Bard 1 Life Sciences (ASX: BD1) is up nearly 300 per cent this month. It only raised $1.3 million in a rights issue where it sought $2.5 million, although a private placement raised $5 million and the shortfall was covered. Otherwise there has been little news in the last month.

Finally on this list is biotech Immutep (ASX: IDP). It is undertaking several clinical trials for its anti-cancer drugs and recently raised $10 million.

Code Company Price (I) Market Cap Short Interest (Shares) 1 Month % Chg
ARU ARAFURA RESOURCES LTD 0.09 90.72M 4.35M 19692.97
STX STRIKE ENERGY LTD 0.12 201.54M 6.01M 5908.81
MAH MACMAHON HOLDINGS LTD 0.18 387.90M 2.52M 842.18
MOY MILLENNIUM MINERALS LTD 0.12 98.03M 1.40M 369.47
BD1 BARD1 LIFE SCIENCES LTD 0.04 47.85M 1.78M 291.27
IMM IMMUTEP LTD 0.02 75.16M 1.13M 232.65
MYL MYANMAR METALS LTD 0.06 94.60M 2.08M 115.25
OEL OTTO ENERGY LTD 0.05 120.56M 3.00M 109.33
IPD IMPEDIMED LTD 0.14 71.00M 9.50M 68.05

Short interest ratio

Stockhead has also revisted the short interest ratio – calculated by dividing the volume of shares shorted by its average daily trading volume.

The ratio measures how many days it would take for all the shares being shorted to be traded at current volumes and so the bigger it is, the more it is ‘shorted’.

The most shorted stock by this metric was iSelect (ASX: ISU). Yes, this iSelect:

iSelect sits 5 per cent down in 2019 but has risen from 60 cents to 70 cents in July. A concern for the company is an ongoing ACCC investigation against it regarding statements on its energy comparison website.

A new name was noticed was Amaysim (ASX: AYS). It is one of those tech stocks that is growing off the back of partnerships but is yet to reach profitability. Its half yearly loss was $4.8 million.

The loss consequently sent it down 30 per cent in the first quarter. It has been recovering but the short interest ratio suggests investors think this will be short-lived.

Code Name Price (I) Market Cap Short Interest (Shares) Short Interest Ratio
ISU ISELECT LTD 0.69 158.16M 1.56M 298.99
FAR FAR LTD 0.07 414.51M 82.29M 187.84
BWX BWX LTD 2.11 267.14M 15.04M 180
AGI AINSWORTH GAME TECHNOLOGY LTD 0.77 252.60M 3.48M 99.08
AYS AMAYSIM AUSTRALIA LTD 0.8 231.66M 4.49M 94.9
MRM MMA OFFSHORE LTD 0.23 193.07M 31.38M 51.01
KGN KOGAN.COM LTD 4.97 466.77M 7.52M 50.14
MLX METALS X LTD 0.23 161.93M 31.67M 46.46
CLQ CLEAN TEQ HOLDINGS LTD 0.43 298.58M 40.67M 42.47
MYR MYER HOLDINGS LTD 0.53 435.28M 63.19M 39.23
TGN TUNGSTEN MINING NL 0.23 167.65M 250.00k 39.17
SLK SEALINK TRAVEL GROUP LTD 3.77 378.33M 1.04M 33.65
SYR SYRAH RESOURCES LTD 0.93 390.64M 60.18M 31.22