Short sales on the TSX: What bearish investors are betting against

In this update on short sales of Canadian public companies, we report on:
1) The collapse of bearish bets against the Toronto stock market
The short position in the iShares S&P/TSX 60 Index ETF (XIU-T), a proxy for bearish bets against the Toronto stock market, has been in a marked downtrend. It now stands at 3.1 per cent of float, having tumbled over the past 12 months from 22.5 per cent.
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2) Companies and ETFs with the largest short positions
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3) Short sellers’ signals during earnings season
Earnings season occurs when public companies release financial reports in the weeks after a calendar quarter has ended. It may be a time of volatility for some stocks because beating or missing analyst’s consensus expectations can cause share prices to spike up or down.
Academic studies have found that short-seller trades can anticipate, on average, whether or not a company will exceed or miss analysts’ expectations. As third-quarter reports are prepared in September and the weeks after, big percentage changes in short positions may thus be of interest.
Some companies have already announced their results but others will be reporting well into November. Here then are the stocks that had significant increases and decreases in short positions over the 60 days to Oct. 25.
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4) Stocks most susceptible to short squeezes
While short positions tend to warn of underperformance in a stock, short sellers can unintentionally push stock prices higher if they rush to buy back the shares they borrowed. Such panic buying can be triggered by mounting losses, higher borrowing costs and other factors.
These factors have been combined by data firm S3 Partners into an algorithm, called the Short Squeeze Score, to rank companies by the likelihood of a short squeeze — with 100 being the highest probability and 0 being the lowest.
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5. End notes on data sources
S3 Partners was the source for short-sales data. It was selected because Canada has many companies interlisted on exchanges in the United States, and S3 Partners sums short positions (currency-adjusted) across both countries. Other data sources for short sales data don’t do this.
Also note that short positions, regardless of data source, may not be purely bearish bets because of trades made for hedging/arbitrage reasons.
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