In Short & Caught, Stockhead recaps the ASX stocks that are the most shorted and have had the greatest increase in short interest right now.

How does shorting work?

Shorting works by selling stocks you do not actually own in the hope of buying them back at a lower price. Investors are in effect betting they will fall.

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

Stockhead has utilised the number of short positions as a percentage of total shares on issue. The most shorted ASX stocks all have 5.5 per cent or more.

Here are the top most shorted ASX stocks

Code Company Short positions Shares on issue % short positions
FLT FLIGHT CENTRE TRAVEL ORDINARY 34062600 199765977 17.05%
BET BETMAKERS TECH GROUP ORDINARY 123153622 903460347 13.63%
NAN NANOSONICS LIMITED ORDINARY 36987170 301833182 12.25%
PNV POLYNOVO LIMITED ORDINARY 75257293 661688044 11.37%
WEB WEBJET LIMITED ORDINARY 35358756 380509819 9.29%
APX APPEN LIMITED ORDINARY 11117490 123383996 9.01%
AMA AMA GROUP LIMITED ORDINARY 89666953 1022435377 8.77%
KGN KOGAN.COM LTD ORDINARY 9262365 106927603 8.66%
SQ2 BLOCK CDI 1:1 NYSE 3776192 43728779 8.64%
RRL REGIS RESOURCES ORDINARY 64237232 754776298 8.51%
ING INGHAMS GROUP ORDINARY 31064766 371679601 8.36%
EML EML PAYMENTS LTD ORDINARY 30848169 373460316 8.26%
MSB MESOBLAST LIMITED ORDINARY 52383242 650454551 8.05%
ZIP ZIP CO LTD.. ORDINARY 55032524 687936061 8.00%
PBH POINTSBET HOLDINGS ORDINARY 19968605 264868212 7.54%
MP1 MEGAPORT LIMITED ORDINARY 10326256 157949016 6.54%
PDN PALADIN ENERGY LTD ORDINARY 190336922 2977779002 6.39%
VUL VULCAN ENERGY ORDINARY 8222147 131645090 6.25%
NEA NEARMAP LTD ORDINARY 30947066 499070294 6.20%
NHC NEW HOPE CORPORATION ORDINARY 49748089 832357082 5.98%
TYR TYRO PAYMENTS ORDINARY 30703169 517213596 5.94%
ANN ANSELL LIMITED ORDINARY 7218240 127692821 5.65%
MFG MAGELLAN FIN GRP LTD ORDINARY 10428746 185715807 5.62%
IEL IDP EDUCATION LTD ORDINARY 15548141 278336211 5.59%
IMU IMUGENE LIMITED ORDINARY 324552109 5848797728 5.55%
CCX CITY CHIC COLLECTIVE ORDINARY 12829325 231920086 5.53%
RBL REDBUBBLE LIMITED ORDINARY 14098326 275920223 5.11%
TPW TEMPLE & WEBSTER LTD ORDINARY 6137168 120514583 5.09%
PME PRO MEDICUS LIMITED ORDINARY 5296601 104355753 5.08%
A2M THE A2 MILK COMPANY ORDINARY 37321192 743656528 5.02%
BOQ BANK OF QUEENSLAND. ORDINARY 32375925 647357479 5.00%
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Flight Centre once again favourite of short seller

Surprise, surprise Flight Centre (ASX:FLT) continues to hit turbulence with short sellers, remaining the most shorted stock on the ASX and has been in this column for most of the year.

Flight Centre’s short position has fallen only very slightly. The company had 17.05%  or ~34.5 million of its outstanding ~199.8 shares on issue held short. Traders are betting travel restrictions mean Flight Centre will struggle to justify today’s valuations.

The Brisbane-based company is forecasting an underlying EBITDA loss of $195 million to $225 million for FY22. Co-founder and managing director Graham Turner said its major issue is a lack of international flights which are substantially down on pre-Covid-19 levels and the fact that domestic travel including flights pay less margins than international travel bookings.

Flight Centre’s share price has actually picked up recently but still remains in the red, down 1.16% for the month to $20.46.


Short sellers target rate-sensitive stocks

The RBA board yesterday used its June meeting to deliver a 50 basis points rise to increase the cash rate to 0.85%,  reaffirming its commitment to putting the inflation genie firmly back in the bottle.

The RBA in early May forecasted inflation will hit 6% by the end of 2022, before easing to 3% by mid-2024 in response to rising rates and as higher energy costs work through the data. The central bank’s target is to keep inflation between 2-3% over time.

Investors Mutual Limited portfolio manager and senior equities analyst Marc Whittaker told Stockhead the good number of stocks being targeted by short sellers are those in rate sensitive sectors, which fell on news of the rate hikes yesterday.

Whittaker said these include medtech or biotech stocks including Nanosonics (ASX:NAN), Polynovo (ASX:PNV), Clinuvel (ASX:CUV), Mesoblast (ASX:MSB),Immutep (ASX:IMM),ProMedicus (ASX:PME). 

He said fintech, payments and sports betting companies are also sensitive to rate hikes. Appen (ASX:APX), Block (ASX:SQ2), EML Payments (ASX:EML) , ZipCo (ASX:ZIP), Tyro Payments (ASX:TYR)BetMakers Technology Group (ASX:BET)and Pointsbet (ASX:PBH) are all on the short seller list.

“These two groupings have been beneficiaries of cheap money for the last five years, generally make small profits at best and have funded their business models with low cost of funding, that is changing now with rates moving higher, which means growth will need to be internally funded more so than previously and because they really don’t generate a lot of cash, growth will slow,” Whittacker said.

“Also, a dollar today is worth more than a dollar in five years, which is when a lot of these stocks were forecasting to become profitable, so they are marked down on higher discount rates.”

Whittacker said others on the list are consumer discretionary including City Chic Collective (ASX:CCX), Kogan (ASX:KGN),  RedBubble (ASX:RBL) and  Temple & Webster (ASX:TPW),  along with Webjet (ASX:WEB) and Flight Centre.

“These are consumer exposed stocks and with a Covid-19 reopening tailwind, as rates go up and consumer spending pulls back, these types of names will see an impact to sales and earnings as well,” he said.