Revealed: The most-shorted UK stocks in the current volatile Covid-19 era
New data from the London Stock Exchange and crunched by ETP provider GraniteShares shows the most-shorted UK stocks include some of the supposed “winners of lockdown”: supermarkets and food delivery companies.
The most-shorted company is Cineworld, perhaps unsurprising given that its cinemas in the UK and the US have remained shuttered for months on end due to the Covid-19 pandemic.
Around 7.5 per cent of its Cineworld was held by hedgie short-sellers, as of 12 July, with New Holland Capital the largest short position with 2.42 per cent of the company’s shares out on loan.
However, the second most-shorted UK stock is currently Sainsbury’s, with six hedge funds collectively holding 6.9 per cent of the blue-chip supermarket and betting on the share price to fall.
Short sellers place bets on stocks that they expect to fall in price. Investors pay a fee to borrow shares in a company and then sell them with the aim of buying them back and then returning them to the lender.
Short sellers are betting that the stock they sell will drop in price, meaning they can quickly rebuy them and return them to the lender and pocket the profit.
Short sellers often bet against high-quality stocks that they believe have risen too far, too fast, and underperforming stocks that they believe may have critical underlying problems.
Following Cineworld, which reported a $3bn annual loss in March, the next most shorted UK companies were Sainsbury’s, embattled miner Petropavlovsk, commercial landlord Hammerson and Domino’s Pizza, where the respective short positions were 6.9 per cent, 6.2 per cent, 5.8 per cent and 4.8 per cent respectively.
Will Rhind, chief executiveof GraniteShares, said: “Shorting stocks used to be the exclusive
pursuit of institutional investors, but sophisticated individual investors are now increasingly doing
this.
“The value of funds invested in our 3x short single stock ETPs listed on the London Stock
Exchange was around $35m million on 1 December 2020, but this increased to around $140m by July this year.