Aggressive short sellers, now being targeted by Canadian regulators, are believed to have shorted a shocking 11 million shares of helium miner Avanti Energy in Canada since 2019, most of it in the past two months alone.
That makes Avanti Energy a large target of short-sellers seeking to enrich themselves by destroying companies, even as Canadian regulators are about to tighten the screws on these out-of-control—and naked—shorts.
Buyins.com, which allows companies and investors to see what’s really going on in the markets--recently put out a shocking report on Avanti, showing that since 2019, 924,000 total shares have been shorted in the U.S. and around 11 million total shares have been shorted in Canada. Which is surprising considering the company has a fairly low share count and what seem to be sound fundamentals.
But most of that—an astonishing 95%+ has happened just since March 2021.
The charts below show the whole picture:
If the Buyins.com report is accurate, it shows that an abnormally large percentage of daily trading volume, 64.91%, is short selling.
So let’s look at the numbers from their report:
In Canadian trading (TSXV: AVN) approximately 11 million total shares have been shorted at approximately C$1.68. Additionally, looking at the short data available to the public, there are no huge shorts, which indicates that the 11 million total shares shorted is happening predominantly at the market maker level. Market makers claim the market maker’s exemption when short selling. This can account for larger volumes of short selling than is reported publicly (total short interest).
If normal market-making suggests that 25% of daily trading volume is short selling, 64.91% is egregious. That’s where the regulators will have to step in, and the timing couldn’t be better with a new push to quash naked short selling that is destroying capital markets.
Regulators should now be looking at the trading action to see if there are illegal trades going on and work with the banks to check everything is above board.
Compliance at the various institutions would have picked up on the US squeeze trigger for AGRYF:
And the Canada SqueezeTrigger:
This data should be enough to interest Canadian regulators who have recently initiated a new push against short sellers, as Oilprice.com reported earlier this week.
In January 2021, the Ontario Capital Markets Modernization Task Force recommended a new prohibition against “misleading or untrue statements” about public companies. The aim was to get rid of “short and distort” and “pump and dump” campaigns that are threatening capital markets. The same legislation was enacted in British Columbia.
Now, the Ontario task force is pushing this harder. The goal now is to require short sellers to actually confirm they can borrow the securities they’re attempting to short. The task force also wants to make them subject to a mandatory buy-in if a sale fails to settle only two days after the settlement day or four days after the trading date.
That would kill naked short-selling and restore the “free market” element to Canadian capital markets. For Avanti, regulators cannot act fast enough. The question now is whether regulators will follow through on their lofty goals that finally put an end to the capital markets free-for-all that has been decimating regular investors.
Other companies that have drawn significant short-seller interest:
Virgin Galactic (NYSE:SPCE) has been one of the biggest targets of short sellers this year. In fact, as of the time of writing, the current short volume is sitting at 25,000,000, representing over 15% of the company’s float. And it’s not necessarily without undue cause. The company’s share price has been moving gradually lower since March, and after posting some disheartening earnings, fell even lower this week.
But is the short attack justified? Some may say it is, considering the company’s continued losses and the delay of a key flight. Others, however, are more optimistic about the company’s future. As with anything in the space industry, what it has planned may not always pan out as expected. But that doesn’t mean there isn’t upside. Once Virgin Galactic is on its feet and routine flights are underway, it has the potential to become a monster in the market.
Gamestop’s (NYSE:GME) short selling fiasco is a story of hubris, greed and unrealistic expectations. Gamestop was one of the most successful companies in the video game industry for over the past several decades, but faced a number of headwinds in recent years. The company had been struggling to stay afloat, and until earlier this year, many thought it may never recover. The company's share price dropped so low that some traders began shorting its stock -- borrowing shares from someone else then selling them as if they owned them with the understanding they'll buy back at a lower price or return those borrowed shares later without having paid anything. And as more short sellers piled into GameStop, the company's share prices continued to decline; but that wasn't the end of the story.
In early 2021, an army of Redditors came to the aid of the ailing stock, sending its share price into the stratosphere and shedding new light on Gamestop's future. Since the company's dramatic run-up from $17 in mid-November to its January high of $450, Gamestop has become a success story for a growing number of investors who dislike the concept of short selling. In fact, short-sellers lost billions of dollars on Gamestop, a move that has empowered retail investors and a new generation of traders.
Gamestop isn't the only company that has faced a long list of short sellers in recent years, however.
Tesla (NASDAQ:TSLA) is a company that's had an interesting rise to the top of the automotive industry. They've taken over companies and expanded into new markets with their electric cars, including solar energy, battery production, and space exploration. However, Tesla is not without its detractors in the investment world. Short sellers have repeatedly targeted Tesla, but it hasn't always worked out in their favor.
In fact, Tesla has made headlines time and time again for its resilience against short sellers. In Feb. 2018, for example, Tesla's share price (TSLA) dropped from $380 to $266 per share in just a few weeks. This is when short sellers hit the stock hardest, but TSLA didn't stay there for long - it rose back up to about $300 by May of that year and has continued to skyrocket since.
At the time of writing, Tesla is still valued at over $600 per share, and despite a recent dip due to growing inflation fears, still has plenty of room to grow. And that's largely due to its extremely vocal CEO, Elon Musk, who has time and time again spoken out against short selling.
AMC Entertainment Holdings, Inc. (NYSE: AMC) is a holding company with investments in movie theaters and entertainment venues. The company operates through two segments: Domestic Theaters and International & Other Theaters. AMC has been on the radar of short sellers for a long time. AMC's business model, which includes owning movie theaters and entertainment venues instead of running them, leaves it especially susceptible to an event like the COVID-19 pandemic that closed down most public areas in North America.
Short sellers hit AMC particularly hard last year, but were met with a lot of competition as an army of Redditors came to the theater company's rescue. Since the initial attack, the stock has become somewhat of a cult-stock for many. And while there has been some significant turnaround thanks to shareholder support, the company’s financials are still struggling, and it is facing a number of hurdles still just to avoid bankruptcy.
AirBNB (NASDAQ:ABNB), which has an estimated 19 million shares of its 110 million-share float held by short sellers with a four day cover time frame should be one of the best stocks to buy in May.
It is estimated that over half of the U.S population has received at least one dose of the vaccine, and close to 38% have been fully vaccinated which would be enough for herd immunity! This means people should not worry about catching the COVID-19 virus when they are traveling because there will be a sufficient amount of those who can't get it (those with vaccinations). And that may well end up being bad news for short sellers.
Additionally, it’s about to be the time of year when companies report their quarterly operating results, and Airbnb is one that the market is eagerly awaiting. The company has already been showing signs of improvement in sales over the last quarter--and there’s a chance they could surpass Wall Street’s expectations.
Canada’s pot stocks have long-been a target for short sellers, especially Aphria (TSX:APHA), one of the largest marijuana stocks on the market. Largely impacted by rumors and news, Aphria is a super-volatile stock, but that doesn’t mean the short attack is reasonable.
While Aphria, and pot stocks in general, remain in a sort of gray area as some of their largest markets, there are a number of bullish factors to be considered. Legalization isn’t just a pipe-dream anymore. In fact, it’s almost a certainty. And when the floodgates finally do open, Aphria could emerge as one of the biggest winners.
Westshore Terminals (TSX:WTE) is a coal export terminal located at Roberts Bank Superport in Delta British Columbia. It is Canada's largest coal export facility, surpassing the combined coal shipments of all other terminals in Canada. The company exports thermal and metallurgical coals to markets around the world, including Japan, South Korea, China, India and Taiwan. Westshore also offers services to ship various bulk cargoes through its marine facilities. Westshore Terminals has been operating for over 30 years and employs more than 240 employees that work 24/7 shifts to ensure continuous operation. Despite its success and longevity, however, is increasingly being targeted by short sellers.
Short sellers are looking at companies like Westshore Terminals based on a simple fact: they’re in the coal business. While the fossil fuel industry isn’t quite down for the count just yet, coal is seeing a major decline that isn’t likely to slow anytime soon. And without a significant pivot, Westshore’s days could be numbered.
Great-West Lifeco (TSX:GWO) continues to be a popular stock among short sellers on the TSX. This North American and European financial services holding company has seen its shares drop 8.9% year over year yet it still attracts interest from investors globally due to its healthy balance sheet, strong cash flows, and more.
Is the short interest justified? Their record as dividend payers is very strong: Great West has been paying out an average annualized return on investment (ROI) for stockholders since 1948 that currently sits just below 7%. It also offers a quarterly dividend yield with dividends paid every three months which equals about 6%, or more than five times what most people can expect to earn through investing in savings accounts today. This could emerge as a huge incentive to fight off the short sellers and keep the stock afloat for many loyal investors.
By. Charlie Danes
SHARE OWNERSHIP. The owner of Oilprice.com owns shares of Avanti and therefore has an additional incentive to see the featured company’s stock perform well. Oilprice is therefore conflicted and is not purporting to present an independent report. The owner of Oilprice.com will not notify the market when it decides to buy more or sell shares of this issuer in the market. The owner of Oilprice.com will be buying and selling shares of this issuer for its own profit.