Data from a short sale analysis firm S3 partners revealed that the value of
(ticker: AAPL ) shares borrowed and sold short exceeded the value of
(TSLA) shares sold short.
Tesla “holds top spot in short interest league tables for 864 days,” wrote S3’s managing director, Igor Dushanovski, in a research report. This series continues until April 2020.
Tesla probably isn’t sad to see its rating fade. After all, short sales are usually bearish bets made by investors who believe a stock is bound to fall. A decline in interest may be a sign that investors no longer believe a stock is overvalued or is facing significant fundamental difficulties.
Bullish Apple investors probably have nothing to fear from the change at the top of the S3 chart. There are several ways to quantify and characterize short selling interest. The absolute value of shares sold short is one indicator. The amount of shares sold short relative to all shares available for trading is also important.
The absolute value of the shares sold probably best reflects the risk to investors. If Apple stock were to rise, say, 10%, short sellers could lose almost $185 billion. And when many shares, relative to the total amount outstanding, are borrowed and sold short, this can signal risk to the company. High short interest ratios can mean that many investors see problems in a company.
Only about 0.7% of Apple shares available for trading were sold short. It’s not that much. The average ratio of short interest for stocks c
is about 1.4%, according to data compiled by Bloomberg. Apple ranks high on the S3 list even with the low ratio because it is America’s most valuable company with a market capitalization of about $2.5 trillion.
That’s almost 2.6 times Tesla’s market cap of $948 billion. About 2.2% of Tesla shares are sold short. This ratio is slightly above average.
Still, Tesla’s short interest ratio doesn’t look like it once did. Back in April 2020, when Tesla started climbing to the top of the S3 chart, approximately 11% of the shares available for trading were sold short. Back then, many bears didn’t think Tesla could grow its business profitably. But Tesla did that.
In 2020, the company delivered about 500,000 vehicles and generated approximately $2.1 billion in operating profit. In 2023, Wall Street predicts about 1.5 million shipments and almost $15 billion in operating profit.
These days, the stocks in the S&P 500 with the highest short interest ratios are
(MMM), according to Bloomberg. The industrial conglomerate is facing legal problems over earplugs sold to the military and long-ago chemicals that have been found in groundwater.
These headwinds have hurt stocks.
shares have fallen more than 50% from their 2018 all-time high of nearly $260 a share.
The stock with the lowest short interest ratio in the S&P is
Philip Morris International
(PM). Investors don’t seem to want to bet against cigarettes.
Write to Al Root at [email protected]