Short & Caught: The 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 that 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”.
Stockhead’s two preferred metrics are raw short interest as well as percentage changes in them within the last month.
Syrah Resources (ASX:SYR) and Galaxy Resources (ASX:GXY) are still the two most shorted small caps with $140 million in short interest between them.
Both have been substantially hit by low and stagnant prices in their respective commodities — lithium and graphite. Syrah has lost two thirds of its value since May and last week it announced it would reduce production for some months until the market rebalances.
One stock shorters have been right about is satellite company Speedcast (ASX:SDA) which has continued to fall. It now has $25 million in short interest against it — nearly 25 per cent higher than a month ago. From a high of $6.69 in August last year it is now below a dollar after multiple profit downgrades.
But stocks don’t have to be down to be targeted by shorters. One of the newly shorted stocks is West African Resources (ASX:WAF). While it has gained 60 per cent in four months, shorters have $11 million short interest against it.
This company is constructing a gold mine in Burkina Faso and it is aiming to produce 300,000 ounces of gold in the first 12 months of production. With record gold prices, this sounds like a money maker; but Burkina Faso is far from the safest jurisdiction to build a gold mine.
The stock with the highest percentage increase in short interest is tech stock CSG (ASX:CSV). This is despite it being one of the few tech stocks that is profitable.
Two of 2019’s most successful IPOs were likewise shorted despite success; Uniti Group (ASX:UWL) and Sezzle (ASX:SZL).
Also shorted was water treatment stock De.Mem (ASX:DEM) and earbud maker Nuheara (ASX:NUH).