Short sellers reaped $51 billion in 7 days as markets tanked on coronavirus panic

Drew Angerer/Getty Images

• Short-sellers were up $51.3 billion in mark-to-market gains as markets tanked between February 24 and March 3, according to a Wednesday report from financial-analytics firm S3 Partners. 
• As markets fell on concerns that coronavirus would hinder global growth, there was an additional nearly $15 billion of broad short selling in the week, S3 data show. 
• Markets gained Wednesday, meaning that additional short selling “may have a short lifespan, but a profitable one if shorts cover in time,” said Ihor Dusaniwsky, managing director of predictive analytics at S3.
• Read more on Business Insider. 

As markets sold off amid panic that the coronavirus outbreak would hinder global growth, short-sellers raked in gains. 

In a seven-day stretch between February 24 and March 3, short-sellers made $51.3 billion in mark-to-market profits, according to data published Wednesday from financial-analytics firm S3 Partners. There was also nearly $15 billion of additional broad short selling in the week, according to S3. In the same period, the S&P 500 index fell 10%. 

“Short side winners clearly outpaced losers, with over five profitable shorts to every one losing position in the more widely traded short equities,” wrote Ihor Dusaniwsky, managing partner of predictive analytics at S3. 

One of the most profitable shorts in that period was Tesla, a favorite stock to bet against, according to the report. The Tesla short bet gained $1.10 billion in mark-to-market profits during the period as shares fell 17%, recouping 12% of the $9 billion mark-to-market losses traders have had betting against the automaker this year. Still, Tesla short-sellers have continued to cover chunks of their short exposure, S3 said. 

Natural-gas producer Tellurian was the “big winner” on a percentage basis, generating a 111.4% return for short-sellers in just over a week as shares fell 76% to a year-to-date low, according to S3.

If Wednesday’s market gains continue, there could be short covering activity in many stocks as short-sellers look to realize some of the recently earned mark-to-market gains, Dusaniwsky wrote. 

That means that the additional $15 billion of recent short-selling activity “may have a short lifespan, but a profitable one if shorts cover in time,” Dusaniwsky said.