BROS - Watch these stocks for a potential rally as short sellers get tested

2023-04-17 08:50:12 ET

Short interest in the U.S. and Canadian markets combined rose 8.7% in Q1 to $977B from the prior quarter, according to data from S3 Partners. Of note, the $77.9B increase was made up of $58.5B in shorted share price increases and an additional $19.4 million of new short selling.

Ihor Dusaniwsky noted that short sellers paid $1.91B in stock borrow fees during the quarter as calculated from daily borrow cost using S3’s daily offer rate and daily shares shorted numbers. That mark was up from the $1.54B in stock borrow fees in Q4 of 2022.

"High stock borrow fees can test the conviction level of short sellers as financing costs can take a large bite out of expected Alpha," warned Dusaniwsky. It was also noted that the consumer discretionary sector was one of the most unprofitable places to be for a short seller in Q4.

In the consumer sector, the stocks with the highest stock borrow fees on a percentage basis as of March 31 were AMC Entertainment ( AMC ), EVgo ( EVGO ), Beyond Meat ( BYND ), Nikola ( NKLA ), QuantumScape ( QS ), XPeng ( XPEV ), GameStop ( NYSE: GME ), Dutch Bros. ( BROS ), Fisker ( FSR ), and Lucid Group ( LCID ).

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