Short & Caught: The ASX small caps investors are shorting right now

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

Shorting works by selling stocks you do not actually own in the hope of buying them 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.

The biggest targets are in tech

The stock that has seen the biggest short interest increase is cybersecurity company Tesserent (ASX:TNT).

After sitting at 5c in the middle of June, it surged as high as 29c in August on the back of revenue growth and acquisitions, as well as industry hype sparked by government investment into the sector.

A number of other tech stocks witnessed increased short interest, including data centre operator DXN (ASX:DXN), HR tech stock Elmo Software (ASX:ELO) and semiconductor stock Bluglass (ASX:BLG).

Bluglass has also rallied in recent weeks. In July it announced the launch of a commercial-scale platform for its patented manufacturing process.

But the broader industry has been caught up in the US-China trade war, which after months of bubbling under the surface poked its head up last week to rattle the market and send many of Blueglass’ peers down.

Also heavily shorted in recent days is PainChek (ASX:PCK). The company has been unable to replicate the solid year it had in 2019 as one of the health sector’s biggest winners.

Resources targets

In resources, Silver Mines (ASX:SVL) and Galena Mining (ASX:G1A)— two stocks with exposure to silver — both saw increased short interest volumes again.

Silver Mines is a pure play exposure with one of the largest undeveloped silver deposits in the world, while Galena is primarily a base metals play with exposure to silver at its project.

Other shorters’ targets include West Australian gold play Bardoc (ASX:BDC) and rare earths play Northern Minerals (ASX:NTU).

Although rare earths has been notably immune from trade tensions between Australia and China so far, Northern Minerals’ project spent five months on care and maintenance due to COVID-19 restrictions.

Last week it told shareholders it had partially restarted operations at its Browns Range heavy rare earth project, with research and development testwork again underway.

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