Sydney Morning Herald just now.......(sorry about the jumbled text this was a quick copy/paste on my phone).
Lithium stocks in short sellers’ sights as Hindenburg blows up tech stock
Short sellers have placed growing bets against the fortunes of several ASX-listed lithium miners, amid debate over whether the much-hyped sector is overheated and could have further to fall.Afterpay owner Block is the latest company to fend off explosive allegations from short sellers Hindenburg Research, which prompted a sharp 15 per cent fall in its share price. The same short seller shot to prominence when it issued a scathing report on billionaire Gautam Adani’s business empire earlier this year.Producers of lithium, a mineral used to make batteries, are attracting interest from short sellers.Credit:APLithium is another sector in short sellers’ sights, while some consumer-facing businesses are also targets – though for very different reasons to Hindenburg’s allegations about Block.Figures from the Australian Securities and Investments Commission (ASIC) illustrate how some sectors are attracting the interest of investors who are “shorting” – a trading strategy where investors bet on, and profit from, a drop in a company’s share price. The corporate watchdog regularly reports on the proportion of a company’s shares that are held short.In the past year, short seller activity has been growing in lithium stocks including Core Lithium, Liontown Resources and Sayona Mining, according to the figures from the corporate regulator.Related ArticleA breakdown of the ASIC data on the website Shortman shows these three lithium miners account for three of the six-most shorted stocks on the ASX. The most-shorted stock overall was Flight Centre, followed by Core Lithium in second place and Zip Co in third.The trend comes as investors have weighed up forecasts of booming demand for lithium due to growing uptake of electric cars, against a softening in lithium prices and concerns about high valuations. Prices of the mineral surged last year, but have retreated in 2023.Totus Capital portfolio manager Ben McGarry said lithium stocks were a clear target for short sellers, including his fund, because of the lofty valuations on some of these businesses.McGarry said some lithium players had attracted significant amounts of retail shareholder money, and some were big enough to be included in stockmarket indices, which meant they were automatically bought by index funds, irrespective of the companies’ specific circumstances. Some lithium players were still in their early stages and unprofitable, yet had hefty valuations, he said.“So from an outsider’s or short seller’s point of view, you’re looking at a company that has got no real business and is priced as if everything is going to work out best for the long term,” McGarry said.Afterpay’s owner, Block, was the target of a short attack.Credit:Attila CsaszarShares in Block, which is dual-listed in Australia and the US, plunged on Friday after short seller Hindenburg Research issued a report alleging the payments company facilitated fraudsters. Block said the report was “factually inaccurate and misleading” and it intended to work with the US Securities and Exchange Commission to explore legal action against Hindenburg.Lithium stocks boomed in 2022, with Canstar previously reporting a 70 per cent jump in Core Lithium shares last year, a 46 per cent rise in Sayona Mining and a 37 per cent rise in Mineral Resources.Related ArticleASIC figures show short interest in Sayona has risen from 0.8 per cent around this time last year to more than 8 per cent on March 17. For Liontown, short positions have risen from about 1.5 per cent to more than 8 per cent over the same period. Short positions in Core Lithium have increased from 0.4 per cent to about 10 per cent.Lower down the list of most-shorted stocks, there is also some short interest in consumer-exposed stocks such as JB Hi-Fi, Breville and ARB Corporation.East 72 executive director Andrew Brown said he was not convinced by the bets against JB, while ARB and Breville were seen as market darlings among mid-caps that could be exposed to a weaker household sector.“There’s a bit of a theme there in terms of consumer spending starting to get pulled in,” he said.
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