Risk rally pushes U.S. stock investors to unwind short bets -Vanda Research (updated)

Qualtrics International

14/10/2021 20:44

(New throughout, updates share prices, adds data and comments)
    Oct 14 (Reuters) - Institutional investors have been paring
their bearish bets on Wall Street's most heavily shorted stocks
in response to increasing appetites for riskier bets, according
to strategists at Vanda Research.
    Short-sellers are bearish investors who borrow stocks,
aiming to buy them back when the price falls to cover the loan
and pocket the difference. 
    Heavily shorted stocks were rallying on Wednesday and
short-sellers were forced to leave bearish bets to curtail their
losses, a situation known as a short squeeze.
    "We believe institutional investors were forced to cover
their shorts, either because they were de-grossing or because
they feared that a rebound in risk sentiment could inflict pain
on their short book," Vanda strategists Ben Onatibia and Giacomo
Pierantoni said about Wednesday's session.   
    Some of the top shorted U.S. traded stocks, in terms of
percentage of shares sold short, have been rallying recently,
according to the latest data from S3 Partners.  
    The top short, Big 5 Sporting Goods  BGFV.O , with 41.5% of
its float sold short, had risen almost 4% in the last three
sessions but was down 0.5% on Thursday. Altimeter Growth Corp
 AGC.O , with 36% of its shares shorted, was rallying 4% on
Thursday with a sharp spike higher in trading volume.
    Blink Charging Co  BLNK.O , which has 36% of its float
shorted, was down 2.5% Thursday after rising 8% in the previous
three sessions while WorkHorse Group  WKHS.O , with 35% of its
float shorted, was falling 2.5% Thursday after rising 10.6% in
the last two sessions. 
    Meanwhile, Wall Street's three major indexes were up more
than 1% on Thursday after also gaining ground Wednesday.   .N 
    Highly shorted names also got high retail mentions on
Reddit's WallStreetBets, the Vanda strategists said, noting that
comments on such stocks on the forum was very close to the daily
average in September and October.
    Retail investors, however, had nothing to do with the short
squeeze, the strategists said, as individual purchases of these
stocks on Wednesday were a lot smaller than most days in
September and October.
    On WallStreetBets, an investor forum on Reddit.com, some
commentators were pointing out on Wednesday that it was a rough
session for bearish investors.   
    "Out there somewhere is a bear crying…" one WallStreetBets
member wrote.
    Vanda argued that if the short squeeze continues in stocks
"it could eventually lure retail investors to abandon crypto
investments" as they say "that rotations between those two asset
classes are very common."

 (Reporting by Medha Singh in Bengaluru, Sinéad Carew in New
York; editing by Uttaresh.V and David Gregorio)
 ((Medha.Singh@thomsonreuters.com; 
sinead.carew@thomsonreuters.com))