The Short Report – 19 May 2022

This story features BETMAKERS TECHNOLOGY GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: BET

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

Summary:

By Greg Peel

Week Ending May 12, 2022.

Last week saw the ASX200 fall -3.7% as support from rising commodity prices in the face of interest rate impacts turned around on Chinese lockdowns. News that Shanghai now has a reopening timetable buoyed the market this week, up until today.

Despite the heavy fall we note the table below is mostly red, although only two stocks shorted by 5%-plus saw position changes of one percentage point or more last week.

Shorts in Betmakers Technology ((BET)) rose to 16.6% from 13.8%. See below.

Laramide Resources ((LAM)) jumped into the table three weeks ago without an obvious reason, but I assumed being Canada-based and listed not just in Toronto and here, but on various other global exchanges, there was likely a cross-border arbitrage at play.

Laramide fell out of the table last week from 7.5% shorted.

In last week’s Report I highlighted several stocks that had appeared in the bottom of the table and the likely thinking behind shorters’ positions. Last week all of AGL Energy ((AGL)), Lendlease ((LLC)), City Chic Collective ((CCX)), BWX ((BWX)) and Bega Cheese ((BGA)) fell back out again.

This does not represent an ASIC data blip nonetheless, as they all fell into the 4% range so what we’re seeing is a lot of churn at the low end.

Last week the low end of the table welcomed back Magellan Financial ((MGF)), Pinnacle Investments ((PNI)) and Humm Group ((HUM)), along with Pro Medicus ((PME)), Chalice Mining ((CHN)) and De Grey Mining ((DEG)).

Weekly short positions as a percentage of market cap:

10%+
FLT     17.5
BET     16.6
NAN   12.3
PNV    10.9
EML    10.0

In: EML                                 

9.0-9.9

WEB, KGN, APX, AMA, RRL

In: APX, AMA, RRL             Out: EML
           
8.0-8.9%

Z1P, PBH, ING, MSB

In: PBH                       Out: AMA, APX, RRL         

7.0-7.9%

SQ2, OBL, CUV

In: CUV          Out: LAM      

6.0-6.9%

NEA, VUL, TYR, DUB, MP1

In: DUB, MP1                        Out: CUV      

5.0-5.9%

IEL, PDN, ANN, ADH, BOQ, MFG, RBL, PNI, NHC, TPW, CHN, HUM, PME, DEG

In: MFG, PNI, CHN, HUM, PME, DEG

Out: MP1, DUB, AGL, LLC, CCX, BWX, BGA

Movers & Shakers

Betmakers Technology predominantly provides analytic software to bookies to inform their operations, but also provides fixed-odds betting. Last week the company announced “momentous” news, being its first fixed-odd betting being launched, in New Jersey.

The market was underwhelmed.

Betmakers’ share price has fallen -39% since last April. The stock is not covered by FNArena database brokers but one might presume either the shorters have an issue with the increasingly crowded online betting space, or they are backing another horse or horses on the long side against their shorts in Betmakers.

There are plenty to choose from in the sector. At 16.5% shorted, up from 13.8%, Betmakers is knocking on the door of the most heavily shorted stock for some time, Flight Centre ((FLT)) on a stubborn 17.5%.

ASX20 Short Positions (%)

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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