short sellers
Short sales on the TSX: Canadian banks and large-cap energy stocks are among the biggest targets of bearish investors
For the month ending Jan. 25, short sellers pulled back a bit from bearish bets on the direction of the Toronto Stock Exchange (TSX), as proxied by the short position in the iShares S&P/TSX 60 ETF (
) edging down from 72.7 million to 67.3 million units. The XIU’s percentage of float sold short also inched down, from 21 per cent to 19.8 per cent.
Companies targeted by activist short sellers
Breakout Point GmbH recently reported on the global trades of activist short sellers for 2021. In the case of Canada, 12 companies were targeted in 2021, compared to 16 in 2020. Activist short sellers publish sell recommendations on companies and disseminate their bearish views through social and/or conventional media channels.
This group of short sellers was very successful in 2021: shares in the 12 targeted Canadian companies are all down, with an average decline of 53.1 per cent. The average drop for the 135 companies targeted globally (mostly in the United States) was 42.1 per cent. Night Market Research had the best call in Canada with its short position in Mountain Valley MD Holdings Inc. tumbling by 87.5 per cent.
The 12 Canadian companies target by activist short sellers in 2021
| COMPANY | TICKER | % CHANGE IN STOCK PRICE | DATE SELL REPORT RELEASED |
| Exro Technologies Inc. | EXRO-T | -48.8 | Mar. 2 |
| Mountain Valley HD | MVMD-CN | -87.5 | Mar. 25 |
| WELL Health Tech. | WELL-T | -33.9 | Apr. 23 |
| PyroGenesis Canada Inc. | PYR-T | -42.4 | Apr. 28 |
| Cielo Waste Corp. | CMC-T | -73.8 | Ma. 28 |
| Reconnaissance Energy | RECO-T | -56.0 | Jun. 24 |
| Flora Growth Corp. | FLGC-T | -81.0 | Aug. 26 |
| Lightspeed Commerce | LSPD-T | -58.6 | Sept. 29 |
| Peak Fintech Group Inc. | PKK-T | -40.0 | Oct. 4 |
| The Metals Company | TMC-T | -59.9 | Oct. 6 |
| Standard Lithium Ltd. | SLI-T | -13.4 | Nov. 18 |
| Nuvei Corp. | NVEI-T | -42.1 | Dec. 8 |
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Source: Breakout Point
Short sales by the Canada Pension Plan
The Canada Pension Plan Investment Board (CPPIB) has established short positions in the shares of quite a few companies on behalf of Canadians and their retirements. According to fintel.io, there are at least four significant CPPIB trades where the percentage of a company’s market capitalization sold short is relatively high: Aixtron SE (2.6 per cent), Onconova Therapeutics Inc. (2.6 per cent), Virgin Galactic Holdings Inc. (2.2 per cent), and Danimer Scientific Inc. (1.9 per cent).
The short interest in these four companies were established on European stock markets. CPPIB’s positions in Virgin Galactic and Danimer Scientific stock were raised substantially in January. Their prices both fell by more than 35 per cent during the month.
We know about these four trades because there is a regulatory requirement in Europe for short sellers to disclose positions above a given threshold. Markets in North America do not have the same reporting requirement, so the CPPIB’s short positions on the TSX or in the United States are not as easily available.
Largest short positions by percentage of float
Data analytics firm S3 Partners identifies companies with the highest percentage of float sold short. Many of the Canadian companies in the top 20 for this month have carried over from the previous month, led once again by Air Canada (33.6 per cent). For this month, newcomers are: Silver Elephant Mining Corp., Fidelity International High Dividend ETF, Horizons US Dollar ETF and Lithium Americas Corp.
Canopy Growth and Lion Electric saw noteworthy jumps in their short positions while iShares S&P/TSX Energy ETF and Sundial Growers Inc. saw noteworthy declines. Short squeeze candidates are Silver Elephant Mining Corp. and Briacell Therapeutics Corp., given the substantial price increases in their stocks year-to-date.
Top 20 short positions by percentage of float (Jan. 25)
| COMPANY | | % OF FLOAT SOLD SHORT |
| Air Canada | AC-T | 33.67 |
| Canopy Growth Corp. | WEED-T | 25.82 |
| Lion Electric Co. | LEV-T | 22.59 |
| iShares S&P/TSX Energy ETF | XEG-T | 20.24 |
| Silver Elephant Mining Corp. | ELEF-T | 20.21 |
| iShares S&P/TSX 60 ETF | XIU-T | 19.85 |
| Aurora Cannabis Inc. | ACB-T | 19.77 |
| Hexo Corp. | HEXO-T | 19.59 |
| Meta Materials Inc. | MMAT-Q | 16.06 |
| Exco Technologies Ltd. | XTC-T | 14.8 |
| Fidelity Int High Dividend ETF | FCID-T | 14.31 |
| Ballard Power Systems | BLDP-T | 13.78 |
| Tilray Inc. | TLRY-T | 13.7 |
| Energy Fuels Inc. | EFR-T | 13.4 |
| Horizons Us Dollar ETF | DLR-T | 13.27 |
| Briacell Therapeutics Corp. | BCT-T | 13.13 |
| Dirtt Environmental Solutions | DRT-T | 13.09 |
| Morguard REIT | MRT-UN-T | 12.59 |
| Sundial Growers Inc. | SNDL-Q | 12.58 |
| Lithium Americas Corp. | LAC-T | 12.57 |
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Source: S3 Partners
Largest increases in short positions by dollar value
During the month to Jan. 25, mostly financial and resource companies had the largest increases in short sales by dollar amount.
Top 20 increases in short positions by dollar value (Jan. 25)
| COMPANY | TICKER | INCREASE IN SHORT POSITION ($MIL) |
| TD Bank | TD-T | $728.4 |
| CIBC | CM-T | $667.8 |
| Canadian Natural Resources | CNQ-T | $578.5 |
| TC Energy Corp. | TRP-T | $541.4 |
| Bank of Montreal | BMO-T | $410.6 |
| Enbridge Inc. | ENB-T | $393.3 |
| Royal Bank of Canada | RY-T | $346.5 |
| Bank of Nova Scotia | BNS-T | $284.5 |
| Manulife Financial | MFC-T | $262.4 |
| Natl Bank of Canada | NA-T | $208.9 |
| Cenovus Energy | CVE-T | $204.3 |
| First Quantum Minerals | FM-T | $199.1 |
| BMO S&P/TSX Banks ETF | ZEB-T | $196.9 |
| Barrick Gold Corp. | ABX-T | $189.4 |
| Teck Resources Ltd. B | TECK-B-T | $124.9 |
| Magna International | MG-T | $115.1 |
| Lundin Mining Corp. | LUN-T | $105.3 |
| Agnico Eagle Mines | AEM-T | $99.5 |
| Fortis Inc. | FTS-T | $97.8 |
| Franco-Nevada Corp | FNV-T | $96.5 |
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Source: S3 Partners
Largest decreases in short positions by dollar value
During the month to Jan. 25, Canadian Pacific Railway Ltd. had an enormous decrease of $8.7 billion in its short position. The rail-transportation company recently completed its acquisition of Kansas City Southern, so the drop likely reflects an unwinding of merger-arbitrage trades.
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Top 20 decreases in short positions by dollar value (Jan. 25)
| COMPANY | | DECREASE IN SHORT POSITION ($MIL) |
| CP Railway | CP-T | -$8,724.2 |
| iShares S&P/TSX 60 ETF | XIU-T | -$708.0 |
| iShares Core S&P/TSX | XIC-T | -$653.2 |
| Bmo S&P 500 ETF | ZSP-T | -$372.9 |
| Shopify Inc | SHOP-T | -$334.3 |
| Lululemon Athletica | LULU-N | -$250.1 |
| Brookfield Asset Mgt | BAM.A-T | -$248.6 |
| Tilray Inc | TLRY-T | -$139.3 |
| Aurinia Pharmaceuticals Inc | AUPH-Q | -$132.3 |
| Ishs Core Msci Eafe ETF | XEF-T | -$123.0 |
| Restaurant Brands Inter | QSR-T | -$121.2 |
| Nutrien Ltd. | NTR-T | -$97.5 |
| Rogers Communications B | RCI.B-T | -$95.4 |
| Emera Inc | EMA-T | -$82.8 |
| BCE Inc | BCE-T | -$74.0 |
| Hive Blockchain Technology | HIVE-T | -$71.9 |
| Thomson Reuters Corp. | TRI-T | -$69.1 |
| Abcellera Biologics Inc. | ABCL-Q | -$67.7 |
| Brookfield Infrastructure | BIP.U-T | -$63.5 |
| Dye Durham Ltd. | DND-T | -$61.9 |
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Source: S3 Partners
Canadian stocks with short squeeze potential
Financial data firm Fintel.io assesses Canadian stocks for their short squeeze potential. The top 20 of their 50 candidates are shown below.
Source: https://fintel.io/ss/ca
Larry MacDonald