The shares of challenger bank Metro Bank and fund house Jupiter are among the ten stocks most short sold on the UK market right now.
Short sellers make money by betting on a fall in the share price of a specific stock.
Data compiled by Canaccord Genuity Wealth Management showed retailer Debenhams is the most shorted UK stock at present, with Metro Bank second and Jupiter ninth.
At present, 11.3 per cent of Metro Bank shares are held by short sellers.
The shares of the bank fell 15 per cent between Monday, February 25 and Tuesday, February 26 after the bank revealed to the market that it had made an error in calculating its risk weighted assets.
Jupiter shares have fallen from £5.18 to £3.69 over the past year, as profits fell and outflows from the company’s flagship bond funds contributed to negative market sentiment.
Outgoing chief executive of the company Maarten Slendebroek told FTAdviser that complying with Mifid rules had cost the firm £18m in 2018, while outflows hit more than £4bn.
But the most recent set of financial results, out on March 1, showed the company increased its dividend, and the shares rose in the immediate aftermath of the results.
Simon McGarry, senior equity research analyst at Canaccord Genuity Wealth Management, said: "In 2017 Carillion topped the list, as over 27 per cent of its equity was being shorted at the time.
"While it isn’t a 100 per cent accurate indicator of future performance (hedge funds get things wrong too), the short interest on a company is often a reliable red flag of a company’s underlying structural issues.
"And of course it doesn’t necessarily mean the company will go bust – but it could mean the dividend is under threat, so it’s an important consideration for investors."
Short sellers "borrow" a share for a fee for a fixed period of time, say three months, and promptly sell the shares they have borrowed.
In three months, they buy back the shares to return them to the original owner. If the share price has fallen in that time then the short seller profits from the difference in price at which they sold the shares and the price three months later, minus the fee they paid to borrow the shares.
Jupiter declined to comment, Metro Bank did not return requests for comment.
David.Thorpe@ft.com
