These 13 stocks are spring-loaded for a surge as it gets too expensive to short them

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Reuters / Brendan McDermid

  • Borrowing costs for some of the market's most-shorted stocks are skyrocketing and creating a situation where short sellers are at risk of getting squeezed, according to a new study from financial technology and analytics firm S3 Partners.
  • When short sellers close out of their bearish positions, it pushes shares higher.
  • Listed below are 13 stocks that look poised to soar as it becomes increasingly expensive to continue shorting them.
  • Visit the Markets Insider homepage for more stories.

Some of the most-shorted stocks in the market are becoming to expensive to bet against, putting short sellers at risk of getting "squeezed."

For context, short sellers bet against stocks by borrowing shares for a fee at a given price. They're looking to buy back the stock at a lower price if it falls. But short sellers can get squeezed when those borrowing costs get too high, forcing them to close their positions early. That, in turn, pushes shares higher.

Financial technology and analytics firm S3 Partners put together a list of stocks that are seeing a spike in borrowing costs. Since continuing to bet against those shares is getting more expensive, S3 says it's increasingly likely that short sellers will have to close their positions.

"If stock borrow rates have already risen significantly, and the borrow is getting more expensive, shorts may begin to rethink their short selling thesis," S3 Partners said in a note on Friday. "Stock loan is a supply/demand market. If supply gets tight or demand spikes borrow fees are bound to go up."

Listed below are 13 stocks that could be set to surge because its becoming too expensive to bet against them. They're ranked in increasing order of how much their borrowing costs have increased over the past two weeks.

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13. Health Insurance Innovations

13. Health Insurance Innovations

Ticker: HIIQ

Short interest: $146 million

Borrow fee: 64.50%

2-week Change: 1.88%

Source: S3 Partners

12. Cleveland-Cliffs

12. Cleveland-Cliffs

Ticker: CLF

Short interest: $740 million

Borrow fee: 3.75%

2-week Change: 2.38%

Source: S3 Partners

11. CrowdStrike

11. CrowdStrike

Ticker: CRWD

Short interest: $255 million

Borrow fee: 3.75%

2-week Change: 3.01%

Source: S3 Partners

10. Tailored Brands

10. Tailored Brands

Ticker: TLRD

Short interest: $121 million

Borrow fee: 6.25%

2-week Change: 4.26%

Source: S3 Partners

9. Tilray

9. Tilray

Ticker: Tilray

Short interest: $253 million

Borrow fee: 70.75%

2-week Change: 8.13%

Source: S3 Partners

8. Overstock

8. Overstock

Ticker: OSTK

Short interest: $190 million

Borrow fee: 71.75%

2-week Change: 14.13%

Source: S3 Partners

7. Tellurian

7. Tellurian

Ticker: TELL

Short interest: $236 million

Borrow fee: 59.50%

2-week Change: 14.88%

Source: S3 Partners

6. PaySign

6. PaySign

Ticker: PAYS

Short interest: $104 million

Borrow fee: 23.25%

2-week Change: 15.38%

Source: S3 Partners

5. Accelerate Diagnostics

5. Accelerate Diagnostics

Ticker: AXDX

Short interest: $399 million

Borrow fee: 50.25%

2 Week Change: 17.13%

Source: S3 Partners

4. Canopy Growth

4. Canopy Growth

Ticker: CGC

Short interest: $1.2 billion

Borrow fee: 42.50%

2-week Change: 17.63%

Source: S3 Partners

3. Beyond Meat

3. Beyond Meat

Ticker: BYND

Short interest: $905 million

Borrow fee: 116.75%

2-week Change: 21.13%

Source: S3 Partners

2. PagerDuty

2. PagerDuty

Ticker: PG

Short interest: $162 million

Borrow fee: 53.25%

2-week Change: 49.38%

Source: S3 Partners

1. Zoom Video Communications

1. Zoom Video Communications

Ticker: ZM

Short interest: $814 million

Borrow fee: 59.50%

2-week Change: 49.88%

Source: S3 Partners

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