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Last week we saw how short selling shares is a dangerous game after stock in the heavily shorted baby formula business Bellamyâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s Australia Ltd (ASX: BAL) rose 55% in a day on the back of a takeover bid. Almost every short in that stock will be nursing heavy losses now with little option other than to close the position or pray that the takeover offer fails to go ahead for one reason or another.

 

So while shorts can be spectacularly wrong, itâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s still worth taking a look at what businesses many market participants are confident will fall in value. Below are four heavily shorted businesses. All data accurate as at September 17 according to ASIC.

 

Blackmores Limited (ASX: BKL) is the vitamins manufacturer and retailer that has 9.7% of its scrip shorted. Sales into China have slowed down over the first half of calendar 2019 and short sellers may be betting this is a structural issue. The stock is also arguably on a high valuation given itâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s struggling to deliver consistent profit growth.

 

Collection House Limited (ASX: CLH) is the purchased debt ledger collection business with 7.7% of its shares shorted. It has a mixed track as a public business and recently invested $8.5 million in âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“neo-bankâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ Volt Bank under its ebullient new CEO. Short sellers seem unconvinced though.

 

Dominoâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s Pizza Enterprises Ltd (ASX: DMP) is the pizza franchisor that recently abandoned 12 month profit guidance in favour of more general long term targets over same-store sales growth and new store openings. Short sellers are sceptical with 10.1% of the scrip shorted.

 

IOOF Holdings Limited (ASX: IFL) has 9.5% of its scrip shorted and its 21% share price rise since Friday on the back of a legal victory illustrates the risks around shorting. For short sellers scrambling to cover on good news losses can be magnified as they have to compete with âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‹Ã…“long onlyâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢ buyers to get their hands on rising stock as sentiment suddenly improves.

- Motley Fool

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Interesting viewing -

 

Muddy Waters Capital

This video is a documentary exploring the right in France to criticize a prominent company traded on the Euronext and its controlling shareholder. It tells the story through the lens of the battle between Groupe Casino and Jean-Charles Naouri on one hand, and its critics, led by activist short seller Muddy Waters Capital on the other. The video was produced by Muddy Waters Capital.

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  • 4 weeks later...

Some comment sense from Johathon Shapiro/AFR

 

Get Shorty? The market needs short-sellers more than it realises

Another week, another foreign shorter mucking with our market. This time it's Wisetech Global, the $10 billion technology stock that's the biggest target yet.

 

Short-seller reports have, for better or worse, become a feature of the landscape, and while there are widespread calls for something to be done about them, that may not be in the broader interests of a well-functioning capital market.

 

Regulators should not rush to ban short-seller reports for two reasons.

 

The first is that they go some way towards balancing the bullsh*t ledger. The overwhelming flow of conflicted, misleading or exaggerated information tends to be directed towards boosting a share price.

 

Whether it's stock promoters at the smaller end of town or brokers at the larger end, it's far easier to make money by convincing the market to buy something than to sell it.

https://www.afr.com/markets/equity-markets/...20191022-p53381

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if people can only get the simple concept of two streams of liquidity

bid or buy to open

sell or sell to open

a healthy market is increased by both forms of liquidity travelling thru it

players who are short are forced to cover by bids overwhelming the offer, this forces more liquidity thru the auction

the bottom line is there must be competing liquidity flows

the bids compete to get available supply forcing price up

the offer competes to get available short-sale supply forcing price down

there is no morality to this effort

it is simply supply and demand

the biggest issue is the understanding of this effort, this is a businesslong-only traders and investors have been slowly bled into the knowledge of the two different streams of liquidity

so that's the other issue of a lack of knowledge

most investors forget the work required to be fully informed on buying stocks (etc) but not of how to best utilise the selling of stocks (etc)and while it can be argued that sell-to-open provides no benefit to society (like securitised derivatives)one cannot hide behind naivety of the whole exercise which is to sell something or buy something to make money

...if its ok to buy something (bigger fool theory) to sell onwards to someone else and make moneythen selling something to someone to buy back from someone else and make money, surely, these two things are equal in their practise ?

in the very early days of the Bourse, trading was considered like jazz music was considered, like the anti-horse motor vehicle was considered

people fill in the blanks of ignorance with subjective ethics that have nothing to do with the operation of buying and selling

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The short sellers that Shapiro is talking about, and the ones I'm interested in, are the "activist short sellers - they are the ones who try to hunt down companies with weak or even fraudulent business models, bet against them and then expose them. If there were indeed "healthy markets" and no fraud you wouldn't have these guys shorting :biggrin:

 

One of the most famous activist shorters is Jim Chanos who uncovered the massive Enron fraud. Chanos has been quite active shortingTESLA, but has been nursing losses on that bet.

 

Another high profile activist shorter is Carson Block (Muddy Waters) who spotted Bernie Madoffâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s fraudulent activity well before his downfall

 

In Australia in recent years we've had QIN exposed, also BLA - both gone into receivership. SYR was attacked by Viceroy research when it was $7 - they put 70c on it - today the stock is 39.5c. More recently attacks on RFF and WTC. WTC is still ongoing with rebuttals back and forth.

 

 

 

 

 

 

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Shortman Top 100

 

I was wondering why Shortman is no longer showing daily short sales, including notable alerts, on their website. Seems they have had a "cease and desist notice" letter from ASIC. This information was very useful - especially the notable alters.

 

ASIC provide a separate report on their website - but not nearly as informative or user friendly - you have to scroll through some 27 pages https://asic.gov.au/Reports/Daily/2019/10/R...AggShortPos.pdf

 

https://asic.gov.au/regulatory-resources/ma...-reports-table/

 

Unfortunately I have had to remove all Alerts and Most Recent Short Sales data from the site permanently. The graphed short statistics will remain, and they will still be updated with ASIC data daily. Apologies for the inconvenience.

 

1:35 AM - 24 Oct 2019

 

ShortMan@shortmancomau

Oct 25

 

Cease and desist notice

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Good to see

ShortMan @shortmancomau

Oct 30

 

After some discussion with the ASX, I have now reinstated all the Alerts and Most Recent Short Sales - however I have had to remove the prices from the stock charts and the volumes from the tabled data. Thanks for your comments and support.
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