Short & Caught: These are the small cap stocks investors are currently shorting
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Each fortnight Stockhead recaps 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.
Considering the restrictions surrounding shorting, any substantial shorting of stocks is worth knowing about even if you own these stocks and only trade “long”.
When we first ran this column, we observed African petroleum stock FAR (ASX:FAR) as the most shorted stock with $95m in short interest. Last fortnight we observed it had fallen to $20m.
But yesterday it was shorted once more with nearly $90m in short interest. After being as low as 5.6c in mid-June it is now at 7.5c.
There has been no news out of the company but there had been speculation in the media about raising capital or perhaps selling its project. The company announced it had “no update outstanding” but reiterated it had “a world class project”.
Syrah Resources (ASX:SYR) and Myer (ASX:MYR) were also heavily shorted recently with $66.7m and $63.3m, respectively. The struggles of the latter company have been well-documented. This last month Myer’s stock has fallen nearly 20 per cent and with no sign of its situation improving, it is an ideal target to “short”.
One newcomer to the list was wind farm operator Infigen Energy (ASX: FR). Its wind farms in South Australia have not been performing well as of late.
Its last monthly update saw two of its Lake Bonney farms go backwards by over 40 per cent in gigawatts per hour. Investors are betting this will continue.
There was little change this fortnight, although Dacian Gold (ASX:DCN) has entered the list. Investors have gone cold on the stock since production downgrades last month despite making new discoveries.
The highest stock was Syrah Resources (ASX:SYR), with its ratio rising from 15 per cent to over 18 per cent in the last fortnight. The stock has fallen over 12 per cent in a month and over 57 per cent since late January.
Analysts have been betting it will rise again. Credit Suisse, predicted it could rise to $2.40 while Macquarie, Canaccord and Morgan Stanley predicted it could at least rise above $1 again. But shorting investors think otherwise.