Short-sellers make billions on small-cap stocks

France Nouvelles Nouvelles

Short-sellers make billions on small-cap stocks
France Dernières Nouvelles,France Actualités

August’s market stumble and a rough start to September has revived interest in betting against the market. S3 Partners says focus on smaller companies.

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P 500 Index has climbed 17 per cent in 2023 versus a 5.8 per cent gain for the Russell 2000 Index of smaller companies.

“Hedge funds will not usually tread into these shallow market cap names on both the long and short side because of the lack of trading liquidity, smaller pools of stock loan availability, and inability to build a significant long or short position without being a significant percentage of the stock’s float.

While the S3 report concluded that smaller-cap stock shorts were the most profitable, they only accounted for 8 per cent of all short selling. The five most profitable smaller-cap shorts this year were: First Republic Bank, SVB Financial Group, Signature Bank NY, Lumen Technologies, and Silvergate Capital.

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