If someone is betting heavily against a UK stock I either own, or plan to own, then I want to know about it. Luckily for me, all firms with a net short position greater than or equal to 0.1% of the issued share capital of a UK listed company have to report that position to the the Financial Conduct Authority (FCA). The FCA publishes a daily short position update based on the notifications that it receives. This includes company stock with net short positions in excess of 0.5% against their issued share capital along with the identity of the position holders.
The FCA’s daily short position update is an important source of information for those who invest in UK stocks. I tend to ignore most of the daily updates and focus on the Friday one. There a a few things I like to do with it. In this post I will be looking at the short position update from Friday, 14 July, 2023
Top 20 most shorted UK stocks on 14 July, 2023
The first thing I do is rank all the stocks by their net short position. To do this I add up all the short positions reported by different reporting institutions against the same stock. The top twenty most shorted UK stocks are tabulated below.
Ocado tops the list again with a reported net short position of 4.80% against it. Short sellers have again reduced their positions since our last report. This time they dropped their bets by 0.45%. ITM Power has taken second place back from Kingfisher with the net short position against the former increasing by 0.15% to 4.70% and the latter decreasing by 0.08% to 4.58%. ASOS returned to the top 20 this week replacing Melrose Industries.
| Rank | Company | Sector | Industry | Net Short Position | Change Since Last Week |
| 1 | Ocado | Consumer Staples | Food Retailers and Wholesalers | 4.80% | -0.45% |
| 2 | ITM Power | Energy | Renewable Energy Equipment | 4.70% | 0.15% |
| 3 | Kingfisher | Consumer Discretionary | Home Improvement Retailers | 4.58% | -0.08% |
| 4 | Keywords Studios | Consumer Discretionary | Electronic Entertainment | 4.06% | -0.05% |
| 5 | BooHoo | Consumer Discretionary | Apparel Retailers | 3.77% | 0.10% |
| 6 | Naked Wines | Consumer Discretionary | Speciality Retailers | 3.63% | no change |
| 7 | Moonpig | Consumer Discretionary | Speciality Retailers | 3.53% | 0.01% |
| 8 | Hargreaves Lansdown | Financials | Asset Managers and Custodians | 3.40% | no change |
| 9 | Hammerson | Real Estate | Retail REITs | 3.37% | no change |
| 10 | Harbour Energy | Energy | Oil: Crude Producers | 3.29% | no change |
| 11 | Cineworld | Consumer Discretionary | Recreational Services | 3.29% | no change |
| 12 | J. Sainsbury | Consumer Staples | Food Retailers and Wholesalers | 3.15% | 0.20% |
| 13 | Tullow Oil | Energy | Oil: Crude Producers | 2.86% | -0.02% |
| 14 | Primary Health Properties | Real Estate | Health Care REITs | 2.78% | -0.07% |
| 15 | Abrdn | Financials | Asset Managers and Custodians | 2.60% | no change |
| 16 | ASOS | Consumer Discretionary | Apparel Retailers | 2.58% | 0.61% |
| 17 | DFS Furniture | Consumer Discretionary | Home Improvement Retailers | 2.47% | 0.16% |
| 18 | Johnson Matthey | Basic Materials | Chemicals: Diversified | 2.41% | -0.55% |
| 19 | Petrofac | Energy | Oil Equipment and Services | 2.31% | -0.56% |
| 20 | British Land | Real Estate | Diversified REITs | 2.26% | no change |
Metro Bank landed in 9th place last week after short sellers increased their bets by 1.49%. It replaced British Land which dropped out the top 20. This week British Land is back in 20th place. Metro Bank is nowhere to be found. There are no current positions against it recorded in the FCA’s daily short position report for Friday, 14 July 2023.
Odey Asset Management can’t break the Metro Bank
Seeing Metro Bank go from 89th to the top 20 last week, only to disappear completely this week, suggests either an error, or something interesting. Taking a look back the position holders from last weeks FCA current disclosures report, there were only two, and both of them were Odey Asset Management.
That’s unusual, because the current disclosure report gives the last reported position by an individual holder. On 7 July, 2022, Odey Asset Management had two current net short positions reported with dates in March and July. March’s was 2.24% and July’s 1.16%. It looks like the March position was reported in error as the week before there was a position dated as having changed on 29 June 2023.
This means that Metro bank should not have been reported as surging into the top 20 last week. But, where was the error made? Given all that is going on at Odey Asset Management, it is reasonable to assume that incorrect data was reported to the FCA. But, it is also then the case that the FCA did not check the data before publishing. And it is a relatively simple check as logically there should only be one position for short seller against a single company’s stock in the current disclosures report.
Given that the FCA restricted the movement of cash and assets from Odey in June, as is apparently normal when financial firms are experiencing “difficulties” so that they can continue to operate in an orderly fashion, perhaps they should have been extra vigilant when dealing with the data coming from Odey. But then again, I didn’t check the data either. I am in a position whereby I have to trust what comes from the FCA. If I had noticed then what would I have done?
Since I don’t have the access to query these sort of things I would have done what I have just done. Looking back through the historic disclosures, I can see that March position. The net short position declines steady over the weeks and months after this date. The March position looks to have been an error in last weeks FCA data. I did not catch it then, and I should have as the rise in net short position was spectacular.
So, I would like to apologise to Metro Bank and its shareholders for reporting last week that it had stormed into the top 20. That was I believe an error, and I will be adding a disclaimer to the top of last weeks report. In addition there will be a check of the going forward to ensure that each position holder only has one reported position against a particular stock. Big moves in the net short position (there have been three in todays top 20 which have been checked) should also be looked at. A more rigorous definition of a big move would help but as it stands, I don’t have sufficient data to do this.
Government review of short selling reports
A final note on recent legislative changes. The UK Government has decided as part of its Short Selling Regulation Review to increase the threshold for reporting short positions to the FCA back to 0.2%. That’s the level it was at prior to March 2020. The lower limit was introduced during the COVID-19 pandemic.
The rules around public disclosure are changing as well. Currently a stock that has a net short position of greater than 0.5% is discussed to the public via the FCA’s short position report and the identity of the position holders is revealed. The institutions argued that individual disclosures impacted the process of price discovery. I don’t buy that. They said that it encourages copycat behaviour and reveals proprietary trading strategies, discouraging investment and research into them and also said it discourages positions above the 0.5% position threshold, as that will be publicly revealed. Ok, but then why not apply the same logic to long only funds and such. The end result is that hardly anything gets reported to the public. They are also worried about short squeezes, perhaps more so than the other complaints, but we will never know.
Not all the respondents were so concerned about public reporting, seeing it as positive. But the UK Government has decided to side with the naysayers. This won’t affect the top 20 calculations done here. But, it will remove a layer of information.
The FCA is implementing these changes, as yet there has been no announcement from them.
DISCLAIMER: James J. McCombie owns shares in Kingfisher. The Storied Investor has no beneficial ownership position in any of the stocks or securities mentioned. No comment in this article should be construed as a recommendation of, or opinion regarding the future performance of, any stock or security or collection of them mentioned herein. Opinions expressed are the author’s and do not represent the views of The Storied Investor.
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