The Short Report – 11 Feb 2021

Weekly Reports | Feb 11 2021

See Guide further below (for readers with full access).

Summary:

Week ending February 4, 2021.

Last week saw the ASX200 initially tumble on unnecessary reverberations from the GameStop affair in the US, before swiftly rebounding to push to higher highs.

The GameStop game has now been run and lost. The stock has fallen -90% from its highs. While one short-side US hedge fund was indeed badly burned in the squeeze, and others found themselves smarting, the question is as to how many of the Reddit crowd managed to get out of their longs with a profit when the music inevitably stopped.

If they were forced to sell at a loss, and were leveraged, it is possible they will not be able to pay up, leaving the likes of popular retail broker Robinhood to carry that loss. That is why the broker, and others, were forced to restrict trading, and why Robinhood in particular was forced to raise billions in fresh venture capital.

The fever spread to Australia, where the uneducated thought they, too, could play the short squeeze game. But no stock in Australia is as heavily shorted as those in the US, particularly GameStop. Indeed shorts on the ASX are currently notably benign.

Highlighted in last week’s Report as shorted stocks in Australia that appeared in particular to have been “GameStopped” were InvoCare ((IVC)) and Zip Co ((Z1P)). Both saw short positions swiftly retreat after the initial attack and both retreated even further last week.

InvoCare shorts are down to 6.9% from 7.4% and Zip shorts have fallen to below 5% from 5.4%.

Perhaps it’s a lesson best learned by allowing the child to put its hand in the fire.

The most shorted stock on the ASX – Webjet ((WEB)) – saw its shorts fall to 13.3% from 14.3% last week. Another heavily shorted stock – Mesoblast ((MSB)) – saw a fall to 8.8% from 10.2%.

Let’s hope we can call this game over.

Back in the real world, shorts in Northern Star Resources ((NST)) rose to 11.6% last week from 7.5% the week before, and 6.8% the week before that. There has been much speculation, in the face of the GameStop affair, as to why this is the case. See below.

Weekly short positions as a percentage of market cap:

10%+
WEB   13.3
TGR    12.3
NST     11.6


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