Short sellers have now lost more than $175 billion this year according to the latest data conducted by financial analytics firm S3 Partners.
According to data from S3 Partners, only 30% of every shorted stock was a profitable trade for investors this year.
“US/Canada equity short sellers started out 2023 with large mark-to-market losses in January, followed by four months of profits, and now a second month of large losses,” S3 Partners said in a research note.
Many economy experts anticipated a recession to hit the United States during the first quarter of 2023 which led to believe the bear market would linger.
But 2023 has proven the bears wrong.
“Investors have piled into tech stocks through 2023 thanks to the release of OpenAI’s ChatGPT in November, and optimism that the Federal Reserve will ease up on its monetary policy.
Both sentiments have helped the S&P 500 and Nasdaq 100 surge about 17% and 39% this year respectively.
Short interest in stocks including Nvidia, Meta, and Tesla have proved to be the least profitable shorts for traders, S3 Partners reveals.
The three companies have ballooned in value so far this year, with Nvidia emerging as an investor favorite,” says Business Insider.
In June, financial analytics firm Ortex reported that short sellers had lost as much as $37 billion that month alone.
For the fourth time this year and the second month in a row, Tesla (NASDAQ:TSLA) was the biggest loser for short sellers.
At that time, short sellers had accumulated $120 billion in losses per S3 Partners data.
“There are still many investors and hedge funds who think that this rally is ready for a pullback,” said Ihor Dusaniwsky, managing director of predictive analytics at S3.
“Hedge funds that are adding leverage after coming into the year positioned defensively have also increased their short positions.”
“Investors have been cautiously positioned really since last summer, in anticipation of this recession that has yet to materialize,” said Jason Draho, head of asset allocation Americas at UBS Global Wealth Management.
Other Short Sellers News
Congress now says not all naked shorts are illegal after it updated its short selling background and policy issues on Tuesday, August 8.
Just last week, the New York Stock Exchange (NYSE) also commented on naked short selling in a new response to the concerned public.
The announcement coincidentally followed the statement AMC CEO Adam Aron made relating to AMC’s exceedingly high number of FTDs.
“Many of you are incensed by the high number of “Fail to Deliver” AMC shares, and that AMC again has been on the Threshold List for multiple weeks. We repeatedly have gone to the NYSE and FINRA, and did so again in July, to put and keep this entire situation on their radar,” said the CEO.
More and more companies are now taking naked short selling seriously.
In 2023, we’ve seen companies such as Global Tech Industries (GTII), Meta Materials (MMAT), Mullen Automotive (MULN), Genius Group (GNS), and now Hycroft Mining (HYMC) open investigations with findings mainly by ShareIntel’s analysis that determines strong indication of market manipulation and illegal trading activity.
Many of these companies have hired on Wes Christian, who says ‘naked short selling’ is a worldwide problem today.
The SEC green-lighted naked shorting of IPOs in 2015 which changed IPO market dynamics by altering the relative power between banks, issuers and investors.
To the detriment of investors, banks now have less fear of incurring major losses from pricing an IPO too high because banks now have a tool (naked shorting) to protect their downside risk,” commented Forbes on Uber’s case in 2019.
Forbes says that thanks to the SEC’s explicit statement allowing naked shorting during IPOs, banks have a chance to win regardless of what the IPO is priced at, a fear they had prior to getting the green light on naked short selling.
According to Congress, naked shorting may result in a failure to deliver the shares to the buyer. For example, the short seller, who trades illiquid shares, may have trouble buying the securities when the time for delivery comes up.
“Some naked shorts are in violation of securities laws. But not all naked shorts are illegal.“
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