Sectors

Short interest in the domestic market decreased by -$23.9 billion, or -2.23%, to $1.05 trillion in the fourth quarter of 2021. The decrease in shares shorted was a reaction to an up-trending market in the fourth quarter (S&P 500 up +10.65%, Nasdaq up +8.28% and Russell 3000 up +8.92%). Most of this decrease, -$38.2 billion, came from short covering, which was offset by +$14.2 billion of mark-to-market increases in short interest. Short sellers decreased their bets as mark-to-market losses negatively affected their bottom lines in the final leg to year-end.

Short interest in the domestic market decreased by -$46.7 billion, or -3.93%, to $1.14 trillion in the third quarter of 2021. Even though the overall market was relatively flat (S&P 500 up +0.23%, Nasdaq down -0.38% and Russell 3000 down -0.43%), the majority of this decrease, -$55.5 billion, came from mark-to-market depreciation of the shorted securities. There was also +$8.8 billion of additional short selling in the quarter as short sellers increased their bets on potential market underperformers.

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This has been a volatile year investing in the Airline sector, but short sellers have been predominately profitable trading stocks in this sector. With the recent announcements of successful Covid-19 vaccines, the return of the airline traveler is expected sooner rather than later, and we are seeing overall short interest in the sector declining. Short interest in the sector peaked in early June and has dropped by -24% since then.

Lululemon Athletica  Inc (LULU) shares short selling is increasing along with its stock price. Shares shorted has increased by 969k, +17%, in 2019 even as LULU’s stock price is up 17% on the year. The trend continues as we are seeing continued short selling over the last week even as LULU breaks through the $140/level for the first time since November 2018. Shares shorted increased by 395k, +6.7%, as LULU’s stock price rose by 4.6%.

The mergers and acquisition activity in the Cannabis Sector continued today with Green Growth Brands Ltd. offering $2.1 billion in a hostile takeover of Aphria Inc (APHA). This follows Altria Inc’s announced $1.8 billion investment in Cronos Group (CRON); Constellation Brands purchase of 5.5% of Canopy Growth Corp (CGC); Molson Coors Brewing Co’s joint venture with HEXO Corp (HEXO); and Anheiser-Busch Inbev’s research partnership with Tilray Inc (TJRY).

iShares iBoxx High Yield Corporate Bond ETF  (HYG) short interest is $6.71 billion, 84.25 million shares shorted, 55.72% of the float.

It is the fourth most shorted ETF in the U.S. behind SPY, QQQ and IWM.

MINDBODY, Inc (MB) short sellers will be looking to have their chakra’s realigned after incurring $130 million in mark-to-market losses on MB’s +65% stock price spike on Monday. MB’s stock price rose by $14.11/share on private equity firm’s Vista Equity Partners’ $1.9 billion, $36.50/share, buyout offer. MB short interest is $331 million, 9.24 million shares shorted or 22.48% of its float.

NIO Inc (NIO US) short interest is 41.3 million shares short, 5.37% of shares outstanding and $317.98 million at risk wagering on a stock price decline.

Referred to as the “Tesla of China”, the Shanghai-based company manufactures and sells autos, offering electric vehicles, parts, and battery charging services.