The last five years have been difficult ones for short sellers, so let’s take a look at the top 10 worst short calls. Despite the March selloff and the weakness in September, 2020 has been especially hard for short sellers. They’ve lost billions of dollars on their short bets over the last five years. Here are the top 10 worst short calls of the last five years based on data from Ihor Dusaniwsky of S3 Partners.
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Top 10 worst short calls
Despite the pandemic that's been going on this year, the lion's share of these top 10 worst short calls of the last five years have been in 2020, and the year's not even over yet.
10. Advanced Micro Devices
Number 10 on the list of the worst short calls of the last five years is Advanced Micro Devices, which ranked in third place for the worst short calls of 2019. Short sellers racked up more than $3.2 billion in net in mark-to-market losses in 2019. Short interest averaged $3.55 billion last year.
Investors have been targeting the semiconductor space for years now as valuations have soared, first due to the cryptocurrency craze and now amid the ongoing tech boom. Short sellers haven't given up on shorting AMD this year despite all the losses they have recorded, although short interest in the chip maker declined almost 7 million shares in August, reaching a multi-year low.
Short interest continued to plunge in September, falling even more than it did in August or in any of the seven months before. In a post on Seeking Alpha, Bill Maurer said short interest in AMD is down more than 85% from the peak in April 2018. He argued that the chip maker's all-stock offer to acquire Xilinx could be a turning point for AMD bears because of the significant dilution it will result in. Short interest in AMD stood at nearly 28.3 million shares as of the end of September.
Number nine on this list of the worst short calls of the last five years is Sea Ltd. which ranked in eighth place for 2020. Short sellers racked up more than $3.6 billion in net mark-to-market losses on the call. Short interest in the company has averaged $2.5 billion this year.
Sea shares have been on a steady march upward this year as the company surprised with its earnings numbers, posting a positive adjusted EBITDA of $7.7 million, compared to last year's adjusted EBITDA loss of $11 million and the consensus for an adjusted EBITDA loss of $41.9 million, according to The Motley Fool. Sea is up more than 300% over the last 12 months, and short sellers have been feeling the burn. Almost 27.8 million shares were being shorted as of the end of September.
Wayfair ranked in eighth place on this top 10 list of the worst short calls of the last five years, but it was in sixth place for 2020. Short sellers have recorded $4.2 billion in net mark-to-market losses this year as short interest averaged $2.9 billion.
Andrew Left of Citron Research was shorting Wayfair, but he closed that long-held position at a profit in February, according to Reuters. It seems he got out just in time to miss out on the carnage that has struck short shellers since then. Wayfair shares bottomed in March and have been rising steadily since then. More than 15 million shares were sold short as of the end of September.
Square ranked in fifth place for the worst short calls of 2020. Short sellers recorded $3.9 billion in net mark-to-market losses this year so far. Short interest has averaged $2.9 billion.
Investors started covering their positions in February ahead of the company's earnings report on concerns about a potential short squeeze. However, it's clear that many of them continued to hold while Square stock climbed throughout the year. More than 24 million shares were sold short as of the end of September.
Zoom Video Communications
Strangely, some investors were shorting Zoom Video Communications, the stock that skyrocketed along with the need for video conferencing services due to stay-at-home orders as many people worked from home during the pandemic. Short sellers racked up $4.2 billion in net mark-to-market losses shorting Zoom. Short interest averaged $2.2 billion this year.
Zoom Video was trading at around $70 in January, but as the year drew on and more and more people needed to use video conferencing services, its stock picked up steam. After a tremendous run, Zoom Video stock is now trading at more than $550 a share. Short interest in Zoom Video stood at more than 12.8 million shares at the end of September.
AMD wasn't the only popular short in the semiconductor space in recent years. NVIDIA was the worst short of 2016 as short sellers recorded net mark-to-market losses of more than $4.7 billion. Short interest averaged $3.2 billion that year.
NVIDIA shares have climbed steeply this year, so this year wouldn't have been a good year to short the stock. Short sellers did see some relief in late 2018 and early 2019 as the shares tumbled, but the pullback was very short-lived. It seems NVIDIA isn't as popular of a short position as it once was. Short interest stood at nearly 7 million shares as of the end of September, although this year's peak had it at almost 12 million shares.
As Amazon shares have soared, there have been plenty of investors worried about valuation, and they've expressed their concern by shorting the stock. Amazon was the second worst short call of 2020. Short sellers have racked up net mark-to-market losses of more than $5.9 billion this year. Short interest has averaged $8.5 billion.
Surprisingly, Amazon was the second most profitable short during the March selloff, but as tech stocks took off again, its fate quickly reversed course. Short interest in Amazon stood at more than 2.7 million shares as of the end of September.
Apple could have earned multiple spots on this list of the top 10 worst short calls of the last five years. In fact, Apple was the third worst short call of this year and the number one worst short call of last year. Apple was also the fourth worst short call of 2017. The most losses on Apple were racked up last year when the net mark-to-market loss was almost $7 billion. Short interest averaged almost $10.5 billion last year.
Interestingly, short interest in Apple jumped $1.3 billion in the month leading up to this week's iPhone event. The company had $10.8 billion in short interest going into this week. Unfortunately, short sellers didn't get the huge selloff they were betting on after the iPhone event. The stock is trading just about where it was trading when the week began. As of the end of September, short interest in Apple stood at more than 88 million shares.
Alibaba could also have captured multiple positions on this list of the top 10 worst short calls of the last five years. The company was the seventh worst short call of this year and the second worst short call of last year. It was the number one worst short call of 2017 with net mark-to-market losses of more than $10.6 billion. Short interest averaged $17.8 billion in 2017.
As of the end of September, about 46.5 million shares of Alibaba were sold short. Short interest has increased over the last two weeks, climbing from about 39.4 million shares.
The number one worst short call of the last five years is Tesla, unsurprisingly. In fact, Tesla ranked among the top 10 worst short calls in each of the last four years. This year, short sellers lost an astonishing $29.2 billion on their bet. Short interest has averaged $16 billion this year.
There have been plenty of big-name investors who have touted bearish bets on Tesla, like Doug Kass, Whitney Tilson, and David Einhorn. Some of these investors have said that Tesla isn't a good short because it just keeps going up, up and away, but they still don't like the valuation. Short interest in Tesla stood at about 57.1 million shares as of the end of September.
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