The Short Report – 22 Jul 2021

This story features WEBJET LIMITED, and other companies. For more info SHARE ANALYSIS: WEB

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

Summary:

By Greg Peel

Week Ending July 15, 2021.

Last week the ASX200 plunged and rebounded, before being a little more steady for the rest of the week. The plunge was all about the collapse of US bond yields meeting increased cases in Sydney.

The recovery was all about not caring about collapsing US bond yields and lockdown extension threats.

As the table below shows, again not much happened in Short Land last week, except at the top of the table.

No surprise that Webjet ((WEB)) has regained its mantle as most shorted stock on the ASX, jumping to 11.9% from 10.9%, with peer Flight Centre ((FLT)) jumping to 10.5% from 9.0%. Lockdowns are not pleasant for travel agents.

But they are for online-only marketplaces, such as Kogan ((KGN)). Lockdowns are manna for Kogan, which had a cracking 2020 but this year has suffered as Australia reopened. Shorts fell last week to 9.7% from a top-of-the-table 10.9%.

The big move last week was for Zip Co ((Z1P)), soaring to 10.5% and number two position from a mere 7.9% the week before. See below.

Weekly short positions as a percentage of market cap:

10%+
WEB   11.9
ZIP      10.5
FLT     10.5

In: ZIP, FLT               Out: KGN

9.0-9.9

KGN

In: KGN          Out: FLT
           
8.0-8.9%

ING

No changes

7.0-7.9%

TGR, EOS, TPW, A2M

No changes

6.0-6.9%

MSB, MTS

Out: RSG

5.0-5.9%

RSG, PNV, IVC, JBH, BGL

In: RSG, PNV                       

Movers & Shakers

There’s Zip Co and there’s Afterpay ((APT)), and then there’s Sezzle ((SZL)), Splitit ((SPT)), Latitude ((LFS)), Smartpay ((SMP)), Zebit ((ZBT)) and Humm ((HUM)).

And that’s just some of the Australasian BNPLs.

While models vary within this group, each offers competition to the other. It seems BNPL exploded on the scene from nowhere, as if it were as innovative as the iPod. But the reality is payday finance, hire purchase and lay-buy were all available to Moses when he bought his first television.

The only difference today is that it’s all digital.

If competition locally is not enough, last week saw an announcement from PayPal that it was bringing its “Pay in 4” service to Australia, and from Commonwealth Bank that it would soon be launching its StepPay product, and from Apple that it would be partnering with Goldman Sachs to provide its own BNPL service.

The only surprise in Zip Co’s short position leap to 10.5% last week from 7.9% the week before (assuming this is not an ASIC data blip), is that Afterpay did not see the same response.

Indeed, Afterpay is not even on the 5%-plus table, and hasn’t been for some time. Afterpay severely burned short-side hopefuls earlier in its meteoric rise to a triple-digit share price, and presumably most of those shorters are still in rehab.

ASX20 Short Positions (%)

Code	Last Week	Week Before	Code	Last Week	Week Before
ALL	0.1	0.2	MQG	0.2	0.2
ANZ	0.8	1.0	NAB	0.9	0.9
APT	1.8	1.9	NCM	0.1	0.1
BHP	4.1	4.2	RIO	0.2	0.3
BXB	0.4	0.5	TCL	0.6	0.6
CBA	0.5	0.6	TLS	0.2	0.2
COL	0.6	0.6	WBC	0.8	0.9
CSL	0.2	0.2	WES	0.2	0.3
FMG	0.5	0.6	WOW	0.3	0.3
GMG	0.2	0.2	WPL	1.0	1.0

To see the full Short Report, please go to this link

Guide:

The Short Report draws upon data provided by the Australian Securities & Investment Commission (ASIC) to highlight significant weekly moves in short positions registered on stocks listed on the Australian Securities Exchange (ASX). Short positions in exchange-traded funds (ETF) and non-ordinary shares are not included. Short positions below 5% are not included in the table below but may be noted in the accompanying text if deemed significant.

Please take note of the Important Information provided at the end of this report. Percentage amounts in this report refer to percentage of ordinary shares on issue.

Stock codes highlighted in green have seen their short positions reduce in the week by an amount sufficient to move them into a lower percentage bracket. Stocks highlighted in red have seen their short positions increase in the week by an amount sufficient to move them into a higher percentage bracket. Moves in excess of one percentage point or more are discussed in the Movers & Shakers report below.

IMPORTANT INFORMATION ABOUT THIS REPORT

The above information is sourced from daily reports published by the Australian Investment & Securities Commission (ASIC) and is provided by FNArena unqualified as a service to subscribers. FNArena would like to make it very clear that immediate assumptions cannot be drawn from the numbers alone.

It is wrong to assume that short percentages published by ASIC simply imply negative market positions held by fund managers or others looking to profit from a fall in respective share prices. While all or part of certain short percentages may indeed imply such, there are also a myriad of other reasons why a short position might be held which does not render that position “naked” given offsetting positions held elsewhere. Whatever balance of percentages truly is a “short” position would suggest there are negative views on a stock held by some in the market and also would suggest that were the news flow on that stock to turn suddenly positive, “short covering” may spark a short, sharp rally in that share price. However short positions held as an offset against another position may prove merely benign.

Often large short positions can be attributable to a listed hybrid security on the same stock where traders look to “strip out” the option value of the hybrid with offsetting listed option and stock positions. Short positions may form part of a short stock portfolio offsetting a long share price index (SPI) futures portfolio – a popular trade which seeks to exploit windows of opportunity when the SPI price trades at an overextended discount to fair value. Short positions may be held as a hedge by a broking house providing dividend reinvestment plan (DRP) underwriting services or other similar services. Short positions will occasionally need to be adopted by market makers in listed equity exchange traded fund products (EFT). All of the above are just some of the reasons why a short position may be held in a stock but can be considered benign in share price direction terms due to offsets.

Market makers in stock and stock index options will also hedge their portfolios using short positions where necessary. These delta hedges often form the other side of a client's long stock-long put option protection trade, or perhaps long stock-short call option (“buy-write”) position. In a clear example of how published short percentages can be misleading, an options market maker may hold a short position below the implied delta hedge level and that actually implies a “long” position in that stock.

Another popular trading strategy is that of “pairs trading” in which one stock is held short against a long position in another stock. Such positions look to exploit perceived imbalances in the valuations of two stocks and imply a “net neutral” market position.

Aside from all the above reasons as to why it would be a potential misconception to draw simply conclusions on short percentages, there are even wider issues to consider. ASIC itself will admit that short position data is not an exact science given the onus on market participants to declare to their broker when positions truly are “short”. Without any suggestion of deceit, there are always participants who are ignorant of the regulations. Discrepancies can also arise when short positions are held by a large investment banking operation offering multiple stock market services as well as proprietary trading activities. Such activity can introduce the possibility of either non-counting or double-counting when custodians are involved and beneficial ownership issues become unclear.

Finally, a simple fact is that the Australian Securities Exchange also keeps its own register of short positions. The figures provided by ASIC and by the ASX at any point do not necessarily correlate.

FNArena has offered this qualified explanation of the vagaries of short stock positions as a warning to subscribers not to jump to any conclusions or to make investment decisions based solely on these unqualified numbers. FNArena strongly suggests investors seek advice from their stock broker or financial adviser before acting upon any of the information provided herein.

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