Short and Caught: And the most shorted stock on the ASX is?

Pilbara Minerals remains most shorted ASX stock, despite price of lithium lifting recently
Uranium plays Paladin Energy, Boss Energy, and Deep Yellow have also been targeted by short sellers
Seneca Financial Solutions said four broad categories caught most names in the latest ASX most shorted stocks list

Before we delve into the ASX’s most shorted, just a quick reminder right off the bat here about what short selling actually is.

Short sellers effectively borrow a stock from a broker, and go wager it (sell it) on the open market. The plan is to then buy the same stock back later after it’s made a hefty drop in price. That done, the short seller buys it back at the lower price and returns it to the lender.

The difference between the sell price and the buy price is the short seller’s profit. Investors are in effect betting they will fall.

Because shorting is restricted under Australian law (and because it’s an all or nothing bloodsport) any substantial shorting of stocks is worth knowing about, even if you only trade long.

And perhaps there’s method in the madness.

Stockhead has utilised the number of short positions as a percentage (5% or more) of total shares on issue according to ASIC’s Short Position Report.

The most shorted stocks on ASX

Swipe or scroll to reveal full table. Click headings to sort:

Code	Company	Short positions	Shares on issue	% short positions
PILBARA MINERALS	PLS	573,541,903	3,011,484,916	19%
IDP EDUCATION	IEL	39,472,539	278,336,211	14%
PALADIN ENERGY	PDN	42,032,644	299,111,508	14%
BOSS ENERGY	BOE	55,274,075	409,688,058	13%
SYRAH RESOURCES	SYR	132,490,929	1,034,891,766	13%
MINERAL RESOURCES	MIN	24,926,450	196,518,604	13%
LIONTOWN RESOURCES	LTR	255,544,502	2,425,108,140	11%
DEEP YELLOW	DYL	95,767,641	969,722,053	10%
LYNAS RARE EARTHS	LYC	91,795,367	934,718,185	10%
CETTIRE	CTT	34,377,039	381,238,220	9%
KAROON ENERGY	KAR	66,610,153	779,277,664	9%
LOTUS RESOURCES	LOT	152,742,003	1,833,567,463	8%
SAYONA MINING	SYA	831,212,132	10,293,296,014	8%
SEEK LIMITED	SEK	27,788,663	356,820,190	8%
LIFESTYLE COMMUNITIES	LIC	9,448,124	121,740,054	8%
ADRIATIC METALS CDI 1:1	ADT	19,961,248	279,432,969	7%
DOMINO PIZZA ENTERPRISES	DMP	6,450,190	92,459,635	7%
CHALICE MINING	CHN	26,848,574	389,026,788	7%
NUFARM LIMITED	NUF	26,117,776	382,307,128	7%
STRIKE ENERGY	STX	192,469,353	2,865,373,749	7%
GENESIS MINERALS	GMD	75,095,892	1,128,451,608	7%
BELLEVUE GOLD	BGL	85,118,704	1,279,998,987	7%
SANDFIRE RESOURCES	SFR	29,294,443	457,445,745	6%
WEEBIT NANO	WBT	12,035,886	189,741,021	6%
FLIGHT CENTRE TRAVEL	FLT	13,914,766	221,872,712	6%
WEB TRAVEL GROUP	WEB	24,567,794	392,530,357	6%
RIO TINTO LIMITED	RIO	23,168,191	371,216,214	6%
IMUGENE LIMITED	IMU	446,864,333	7,437,250,222	6%
CLINUVEL PHARMACEUTICALS	CUV	2,925,172	50,060,680	6%
THE STAR ENTERTAINMENT GROUP	SGR	165,866,238	2,868,680,877	6%
INTEGRAL DIAGNOSTICS	IDX	12,968,982	233,961,997	6%
CORPORATE TRAVEL MANAGEMENT	CTD	8,105,816	146,325,746	6%
DEXUS UNITS STAPLED	DXS	59,153,890	1,075,565,246	5%
NOVONIX LIMITED	NVX	27,042,592	493,749,474	5%
SILEX SYSTEMS	SLX	12,615,502	237,241,524	5%
BANK OF QUEENSLAND	BOQ	35,082,054	661,469,455	5%
THE A2 MILK COMPANY	A2M	38,031,967	724,019,118	5%
VULCAN ENERGY	VUL	8,872,843	188,188,571	5%
OMNI BRIDGEWAY LTD ORD US PROHIBITED	OBL	13,270,041	282,584,186	5%
CHAMPION IRON LTD	CIA	24,238,299	518,251,001	5%
NEW HOPE CORPORATION	NHC	39,345,538	845,335,464	5%
NANOSONICS	NAN	14,054,094	303,367,903	5%

Pilbara Minerals remains most shorted ASX stock

Pilbara Minerals (ASX:PLS) remains the most shorted stock on the ASX with a short position of 19%, only slightly down from 20% in September.

Lithium prices have been tracking downwards in 2024 from their 2022 peaks with a surpluses for the battery mineral as more lithium mines came into production around the world.

However, in the past month lithium prices have again been recovering on the back of China’s largest stimulus package since the Covid-19 pandemic, with optimism it could encourage spending on goods such as electric vehicles.

Lithium has also made headlines recently with mining giants Rio Tinto (ASX:RIO) and BHP (ASX:BHP) taking advantage of depressed lithium prices and the Argentine Government’s new Incentive Regime for Large Investments (RIGI) scheme that provides attractive tax incentives for foreign companies.

RIO last week announced a $10bn deal to acquire Arcadium Lithium (ASX:LTM), a counter-cyclical investment that cemented its belief in lithium’s long term prospects, direct lithium extraction processing tech and Argentina’s status as an emerging mining jurisdiction.

READ Rio enters the lithium chat: Counter-cyclical deal has lithium bosses primed for more M&A

However, it seems short sellers remain cautious as to whether the lithium price increase remains sustainable with other lithium stocks including Sayona Mining (ASX:SYA) and Liontown Resources (ASX:LTR) also targeted by short sellers. The PLS share price is down ~29% YTD.

IPD Education second most shorted stock

Specialising in international student placement services and high-stakes English language testing, IDP Education (ASX:IEL) is the second most shorted stock on the ASX with a short position of 14%.

IEL also operates English language schools in Southeast Asia and organises educational events and conferences across the globe. Short sellers appear to be targeting IEL due to unfavourable student visa changes in key markets including Australia, Canada and the UK.

Uranium stocks targeted along with graphite and coal

Uranium plays Paladin Energy (ASX:PDN), Boss Energy (ASX:BOE) and Deep Yellow (ASX:DYL) have also been targeted by short sellers as the price of the commodity edges up of late after falling from $US100.25/lb in January to as low as $US78.50/lb in August.

Uranium is up to $US83/lb in October, the highest in two months and tracking the rise for other energy commodities amid an improved demand outlook.

Nuclear power is seen as a key solution to global warming with countries at the COP28 summit, such as the US, Canada, UK, and Japan, pledging to triple nuclear production by 2050.

Stimulus packages from China have aided the outlook of uranium with Beijing looking to also increase sustainable energy development, reducing its reliance on coal with nuclear energy, in turn boosting uranium.

According to the World Nuclear Association China has 56 operable nuclear reactors and 31 under construction.

In the US nuclear power has also been gaining focus with Microsoft entering a deal with Constellation Energy to restart the Three Mile Island plant to power its data centres.

IG analyst Tony Sycamore told Stockhead he didn’t see the reductions in the short positions in the big miners and the uranium stocks that he might have expected given how far these stocks have rallied in recent weeks.

“That says to me there are a lot of traders still caught offside and likely hoping that Chinese fiscal stimulus measures don’t eventuate,” he said.

“My view is fiscal stimulus is coming, possibly at the China NPC standing committee meeting later this month.

“If correct this will heap further pain on a still crowded short China trade.

Four broad categories of shorted stocks

Seneca Financial Solutions CEO and investment advisor Luke Laretive told Stockhead there were four broad categories that caught most names in the latest list of most shorted stocks on the ASX.

He said the first was negative views on underlying commodities.

“Equities are leveraged to underlying commodity prices and often a cheaper, easier way to express a bearish view, relative to the underlying commodity, particularly outside of LME-traded commodities,” he said.

He said the second was negative views on the underlying fundamentals of the business with stocks standing out including Lifestyle Communities (ASX:LIC), Domino’s Pizza Enterprises (ASX:DMP), Nufarm (ASX:NUF), Star Entertainment Group (ASX:SGR), Strike Energy (ASX:STX), Novonix (ASX:NVX),Weebit Nano (ASX:WBT) and Imugene (ASX:IMU).

“Many of these names are decent shorts as investors tend to pile in on the chance of a successful binary outcome and associated gain,” he said.

“But if it’s unsuccessful, the stock could crater, and shorts would profit heavily.”

Laretive said to think medical trials with the likes of IMU or NVX, regulatory issues for a company likes SGR or gas discovery for STX.

“Others, like LIC, for example, have stretched balance sheets, and fund managers can short easily and have a high likelihood that a discounted cap raise is on the cards soon that will enable them to profitably cover their short.”

He added stocks where they are are the least preferred of their peer group – such as RIO relative to BHP, Bank of Queensland (ASX:BOQ) relative to Commonwealth Bank (ASX:CBA) or Seek (ASX:SEK) relative to REA Group (ASX:REA) also seem to be shorted.

“There is nothing fundamentally wrong with these names, but maybe they are just the weakest in their peer group,” he noted.

“There are not a lot of ‘pure’ shorters on the ASX.

“Most fundies who short are more market-neutral type stock pickers or long-short strategies expressing a temporary view on earnings.”