Short & Caught: Turbulence still for Flight Centre despite $180m cap raise to buy UK-based Scott Dunn
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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 of total shares on issue. The most ASX shorted stocks (excluding CDIs) all have 5% or more.
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Short sellers still think there might be turbulence ahead for Flight Centre (ASX:FLT) which remains the ASX’s most shorted stock despite rising more than 17.5% in the past month after a successful cap raise and news of an acquisition.
FLT last week exited a trading halt and announced a $180m share placement to buy Scott Dunn, a leading UK-based luxury travel brand specialising in tailor-made luxury holidays, for an enterprise value of £121 million ($211 million).
Commenting on the acquisition and placement FLT CEO Graham Turner said the support shown by new and existing institutional investors for the placement was very pleasing.
“The acquisition of Scott Dunn will enable us to grow our leisure presence in the attractive US and UK luxury markets, complementing our existing footprint,” he said.
Short sellers continue to punt against Betmakers Technology Group (ASX:BET) which has seen no change in its short position over the month, remaining the second most shorted stock on the ASX.
BET operates a platform model providing the back-end technology for bookmakers, primarily in horse racing.
BET was required to answer a list of questions from the ASX’s compliance unit in December about a $15 million payment to gambling mogul Matthew Tripp who holds stakes in BetMakers and online bookie Betr.
Last week BET announced that it had cancelled 32 million unquoted options and 32 million unquoted class B performance rights issued to Tripp Investments Pty Ltd as trustee for the Tripp Investment Trust, an entity associated with Tripp.
The company said the securities have been cancelled following vesting conditions associated with the delivery of a
“transformational deal” before February 1 2023 not being satisfied. BET said there are no further securities due to Tripp.
The gambling tech company also announced a board and management restructure including moving former CEO Todd Buckingham to a new role of chief growth officer, which also saw him stepping down from the board.
BET has seen its shares fall ~18% in the past month and 50% in the past six months.
Short interest in online sports betting company Pointsbet Holdings (ASX:PBH) remains at 7%. PointsBet recently announced it had extended its service agreement with NBC Universal Media to target live betting states in the US. Pointsbet also reported a record group Total Net Win of $103.4m for Q2, up 34% on pcp.
The PBH share price is up slightly 0.31% in the past months but remains down 54.38% in the past six months.
Several of the ASX small cap market’s hottest commodity lithium stocks have found themselves in the top 50 most shorted ASX stocks.
LTR has realised a $350m blowout in costs at its Kathleen Valley lithium mine, however it is making progress on new operations commencing open pit mining at Kathleen Valley in WA’s Northern Goldfields last week.
And while short sellers are still betting against the lithium plays, battery metals experts at Benchmark last year estimated that at least 384 new graphite, lithium, nickel, and cobalt mines are needed in the next 12 years to feed a 500% increase in global battery demand.
As interest rates continue to rise on surging inflation, consumer discretionary stocks are also on the list of short sellers including Kogan (ASX:KGN), Temple & Webster (ASX:TPW), JB HiFi (ASX:JBH) and City Chic Collective (ASX:CCX).
But as Tim Boreham told Stockhead readers “a slew of ASX discretionary retailers”, including some of the above names, have reported sales numbers during the latest reporting season that largely defy a downturn and lingering supply chain disruptions.