Is there hidden value in shorted companies? – 3 share ideas

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We explore short selling and look at three of the most shorted companies on the stock market.

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Published on 3 November 2023

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

Short Selling, also known as ‘shorting’ or ‘going short’, is a strategy aimed at benefiting from falling stock market prices.

So, when the stock price falls, a short seller will make money. But this means the opposite’s also true – short sellers lose money when the price of the stock rises.

It’s a very risky strategy because, theoretically, share prices can rise to unlimited levels, meaning a short seller’s losses can also be unlimited.

When a company has a large short position against them, it could be a sign that there’s a serious issue at the company. This could be for a variety of reasons like too much debt, the business being in a tough spot in the market cycle, or if there’s an ongoing company scandal.

But in some cases, even though there’s a short position against the company, there might still be an investment case.

Short positions can push the company’s