Short sellers made over US$50 billion from their US positions during the recent sell-offs related to coronavirus outbreak

Short sellers added to their US positions during the recent coronavirus-related sell-off, making more than US$50 billion in profits over seven trading days, according to data from financial analytics firm S3 Partners.

There was nearly US$15 billion of additional short selling between February 24 and March 3, bringing total domestic equity short interest to US$848 billion. Those short sellers made US$51.3 billion in mark-to-market profits, S3 said in a report published Wednesday. The S&P 500 Index fell 10 per cent over the same period.

The most profitable short since February 24 was Tesla, “a very familiar name for short sellers,” the firm said. Investors who bet Tesla would decline made US$1.1 billion over the seven-day stretch, recouping some of their US$9 billion in year-to-date losses, as shares fell 17 per cent.

On a percentage basis, natural-gas producer Tellurian was the big winner for short sellers, generating a 111 per cent return as shares plunged 76 per cent.

“If today’s [advancing] market is followed by several more days of positive stock price movement, we should see short covering activity in many stocks as short sellers realise recently earned mark-to-market gains,” S3 said. “A good portion of the US$14.6 billion of recent short selling activity may have a short lifespan, but a profitable one if shorts cover in time.”