Even as the market hits record highs, hedge funds and other short-sellers are still shorting huge swaths of the stock. Many short sellers have withdrawn their money since the meme stock craze began, but the practice of shorting stocks persists. Some of the biggest stocks on the list of most shorted stocks this year are struggling. But with interest rates falling this week and stocks broadly climbing, these target stocks could become candidates for a so-called short squeeze. A squeeze occurs when a rising stock spurs short sellers to cover their positions by buying shares quickly to limit losses. In some cases, this can create a feedback loop, with additional buying pressure forcing other short sellers to do the same. The five stocks with market capitalizations of at least $2 billion had the highest short interest as a percentage of outstanding or highly liquid shares as of the end of May, according to FactSet data. Hedge funds are looking for ways to short commercial real estate, the listing shows. Arbor Realty Trust and Medical Properties Trust are both real estate investment trusts and are publicly traded vehicles in the industry. Another area hedge funds appear to be targeting is niche financial companies. Upstart is a personal lending company and Trupanion is a pet insurance company. Commercial real estate and smaller financial companies can both benefit from the continued strength of the U.S. economy and rate cuts from the Federal Reserve. ImmunityBio is a speculative name that is often targeted by short sellers, as biotech stocks can move wildly in either direction based on clinical trial results. The company is running multiple trials, but first-quarter revenue was just $40,000. Last year, the stock traded below $2 a share and above $9 a share. IBRX 1Y mountain ImmunityBio has been a volatile stock over the past 12 months. Two companies outside the top five that have outperformed this year are Comstock Resources and Madrigal Pharmaceuticals. This performance may make them more likely to be short-sold in the short term, but the exact financial status of these short sellers is unclear. Notably, GameStop does not appear on the expanded list as a stock with at least a 25% short interest. The Meme stock benefited from a short squeeze during its 2021 rally, but bets against the stock are now thinning. Short seller Citron Research said on Monday it had exited its position in the stock. —CNBC’s Nick Wells contributed reporting.
