10 most shorted stocks on FTSE

Summary 

• Short selling is a high risk/ reward trading strategy that is gaining popularity with new investors.

• Short seller aims to profit from a drop in share price by selling the shares in open market.

Short selling as a trading strategy has been used to make profitable returns and is now gaining popularity among new investors as well. Short-sellers bet on, and profit from a drop in security prices, and it is a high risk to reward ratio strategy.  

In short-selling strategy, an investor borrows shares in a company he wishes to short sell and then immediately sells them in open markets and hopes that the price goes down so that he can buy back the same shares at a lower price hence profiting the difference between the initial sell price and the price at which the shares are bought back.

Here are some of the most shorted stocks on the London Stock Exchange:

Hammerson Plc (LON: HMSO)

The mall and shopping centre operator has suffered during the lockdown as physical shops were forced to close down to curb coronavirus spread. The company was already facing heat from a reduced shortfall in physical stores because of the rise of online shopping in recent years. The repeated lockdown impacted the company revenue and might have led to the short selling from investors. At present, around 5.76% of shares of the company are in short-sell position.

Tullow Oil Plc (LON: TLW)

The oil and gas producer’s stock return was impacted because of lower oil prices during the pandemic time and the higher amount of debt the company took to finance its operations, which made investors cautious about the company, as the company was struggling to repay its rising debt to its creditors. As of 30 June 2021, the company’s total debt stands at £ 1.68 billion, and the market participants short close to 4% of company issued shares.

J Sainsbury Plc (LON: SBRY)

The stock of supermarket chain operator might be a surprise on this list of stock as most of its shops were open during pandemic time. Still, the company might be struggling to grow because of the rise in competition in the supermarket segment after the entry of German rivals Aldi and Lidl. Race to acquire customers and gain market share by cutting down on product price might impact the company’s profitability and growth and may be because of this reason close to 8.18% of the company’s shares are in a short position as investors anticipate to gain from stock price fall.

Cineworld Group Plc (LON: CINE)

The cinema chain operator has been favourite amongst short-sellers for last one year as lockdown has completely halted the business of the company and shifting trend to release movies directly on the streaming platform, impacting the company’s profitability in the future as well. It is one of the key reasons investors chose to take a short position in the company stock. The company’s 7.53% shares are out on loan to short-sellers at present.

Metro Bank Plc (LON: MTRO)

The retail and commercial banking service provider struggled with the credibility issue even before the pandemic started, back in 2019, when it revealed that it didn’t have enough capital to pay its commercial loan. Recently, NatWest agreed to take £3 billion worth of its mortgage which led to a temporary rise in share price. However, around 3.59% of the company’s shares are in a short position as investors anticipate making gain from falling share price of the company.

Network International Plc (LON: NETW)

The digital payment solution firm provides its services in the Middle East and Africa. The company’s stock is down 23% since its listing in 2019 and failed to impress shareholders despite having strong links with MasterCard. The company has recently appointed Nandan Mer as its new CEO to form its strategy and restrict the share price fall. The company reported a 1% rise in revenue in the first quarter of 2021. Around 3.97% of company shares are on loan to short-sellers at present.

Petropavlovsk Plc (LON:POG)

The company is a major gold mining company based in Russia. The company has the largest production and gold reserve in the far east of Russia. The company’s stock has been on short seller’s radar for a sell position as stock price directly links to how gold prices perform in the international market. If gold price witnesses’ sudden volatility in price because of global events, then it would impact the company’s share price. The investors have shorted 6.24% of the company shares at present, looking to gain from share price fall.

Ultra Electronics Holdings (LON:ULE)

Defence and aerospace stock has experienced reduce profits margins over the last three years. The company recently revealed its result for the first six months of 2021, in which it posted a 2.1% drop in revenue at £404.5 million. As per recent market reports, the company could be a takeover target by private equity firms. Investors have taken a short position on 3.56% of the company shares at present.

John Wood Group PLC (Lon: WG.)

The company provides engineering and consultancy services and has operations in over 60 countries. The company reported a fall of 21% in revenue at £2.34 billion in the first half of 2021. Recently the company settled a bribery and corruption investigation in which the company will pay a total of £129.49 million fine over the next three years. A total of 3.6% of company shares are in the short position at present.

Domino's Pizza Group Plc (LON: DOM)

The pizza chain operator is another surprise on the list as the lockdown increased the food delivery orders, which benefited the company in revenue and profit growth. However, still 4.67% of the company shares are shorted by market participants at present in anticipation of some negative news which could lead to a stock price fall.