The story of GameStop stock is truly one for the history books. Starting in January of 2021 a short squeeze of the stock occurred causing massive losses for short sellers and hedge funds and massive gains for investors. Having a look at the price chart the story really speaks for itself.
By breaking down the short squeeze we can begin to understand why this happened and can search for further opportunities before they occur. The basis is that the company was overshorted, in fact around 140 percent of the public float was shorted. The thing about short selling is that they later have to be covered at a later date, that is the entity that shorted the stock will have to rebuy the stock to cover their short position. The idea is to do so at a lower price that it was sold at to make a profit. However, if the price rises after it is shorted the short seller can be forced to rebuy the stock at a higher price. Over 100% of the float had been short sold which means that shorted shares had been relent and shorted again. The subreddit wallsteetbets exposed the overshorting of GameStop and realised that buy buying and holding the stock, short sellers would be forced to rebuy at much higher prices. In essence there were two things which allowed this to occur: 1. A significantly overshorted stock 2. Media attention. If these two factors are replicated it is possible to recreate a short squeeze for any company.
So what companies are shorted over 100% in Australia? None.
But here are the most shorted companies in Australia in March 2021.
- Tassal (TGR) – 12.8% Shorted
- Webjet (WEB) – 10.7% Shorted
- Inghams (ING) – 7.9% Shorted
- Flightcentre (FLT) – 7.7% Shorted
- Speedcast (SDA) – 7.6% Shorted
This information is easy to find and made public by ASIC, here’s a link to their latest research https://asic.gov.au/regulatory-resources/markets/short-selling/short-position-reports-table/
As you can see the company with the highest short position in March 2021 is TGR Tassal which is 12.8% shorted, well short of the 140% of Gamestop. Shorting just isn’t as big here in Australia and arguably more regulated. Interestingly we talked about WEB and FLT in one of our most recent articles and why we recommend them as a buy https://prophet-invest.com/will-the-travel-sector-make-you-rich-web-asx-qan-asx-flt-asx
Nonetheless, what is Tassal and is it the next GameStop? Tassal is a household name that supplies Tasmanian grown Atlantic Salmon to Australia and the world.
Tassal is suffering from poor export markets due to COVID-19 and also has a massive debt of $220M to top it off. This year they saw NPAT fall 30%.
Since TGR became the most shorted company on the ASX there has been in influx in volume.
This is likely a response to the GameStop short squeeze and trading just looking for any sign of the Australian short squeeze story. TGR does not have an insane short position, instead there is plenty of available public float for short sellers to cover. Additionally, and arguably more importantly there is no major media attention to create a short squeeze. Media attention is the main reason for GameStops success, with the widespread coverage there were many more people jumping aboard in FOMO. Having such a high short position was only half of the reason for the price jump. With so many people jumping aboard any stock could be pumped and dumped. So there does not seem to be any short squeeze opportunities available on the ASX today.
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