Skip to main content

Despite the recent plunge in stock markets, there wasn’t all that much turnover among the most shorted companies in Canada during the month to Oct. 18. Some notable exceptions were a large jump in the short position on Laurentian Bank of Canada, a sizable decrease in Quebecor Inc.’s short position, and a further drop in the number of marijuana companies on the table of the most costly shares to borrow.

The first table shows the 20 most-shorted Canadian companies, based on the percentage of shares loaned out. The lending of shares is a proxy for short positions since short sellers need to first borrow shares to sell them. IHS Markit provided the data.

The 20 companies with the highest percentage of shares on loan

Company Ticker Sector Percentage of shares on loan (annualized)
Laurentian Bank of Canada. LB-T Banks 28.3%
First Majestic Silver Corp. FR-T Materials 23.3%
Maxar Technologies Ltd. MAXR-T Capital Goods 22.0%
Badger Daylighting Ltd. BAD-T Capital Goods 19.7%
Advantage Oil & Gas Ltd. AAV-T Energy 16.0%
Quebecor Inc. QBR.B-T Media 13.1%
Pretium Resources Inc. PVG-T Materials 13.0%
Westjet Airlines Ltd. WJA-T Transportation 12.9%
Sleep Country Canada Holdings Inc. ZZZ-T Retailing 12.6%
Genworth MI Canada Inc. MIC-T Banks 12.1%
Canadian Western Bank CWB-T Banks 11.5%
Cineplex Inc. CGX-T Media 11.4%
Home Capital Group Inc. HCG-T Banks 11.2%
Trican Well Service Ltd. TCW-T Energy 10.9%
Precision Drilling Corp. PD-T Energy 10.0%
Paramount Resources Ltd. POU-T Energy 9.8%
Birchcliff Energy Ltd. BIR-T Energy 9.8%
Prairie Sky Royalty Ltd. PSK-T Energy 9.5%
Uni-Select Inc. UNS-T Retailing 9.4%
Exchange Income Corp. EIF-T Transportation 8.9%

Source: IHS Markit

Probably the most significant change is the leap in Laurentian Bank of Canada’s short position to 28.3 per cent of shares, putting it in the top spot. Being the only unionized bank in North America, Laurentian Bank faces the risk of labour strikes and problems such as delays in the upgrading of branches and internal systems. In fact, that is what is happening now as management and union officials are at an impasse in the negotiations to reach a new collective bargaining agreement.

The second table lists the 20 companies with the largest monthly increases in short interest. Companies with less that $500-million in annual sales are excluded to keep the table from being overwhelmed by a multitude of tiny businesses.

The 20 companies with the biggest increases in percentage of shares on loan 

Company Ticker Sector Change in percentage of borrowed shares from month ago
Finning International Inc. FTT-T Capital Goods 362.6%
Thomson Reuters Corp. TRI-T Financials 246.3%
Interfor Corp. IFP-T Materials 215.0%
Suncor Energy Inc. SU-T Energy 214.8%
Interrent REIT IIP.UN-T Real Estate 165.0%
Industrial Alliance Insurance IAG-T Insurance 162.8%
Air Canada AC-T Transportation 123.4%
Alamos Gold Inc. AGI-T Materials 112.9%
Nutrien Ltd. NTR-T Materials 106.1%
Western Forest Products Inc. WEF-T Materials 104.9%
Brookfield Infrastructure. BIP.UN-T Utilities 96.8%
Barrick Gold Corp. ABX-T Materials 93.3%
Manulife Financial Corp. MFC-T Insurance 88.0%
Canfor Corp. CFP-T Materials 88.0%
George Weston Ltd. WN-T Food 86.7%
Waste Connections Inc. WCN-T Services 81.1%
Boyd Group Income BYD.UN-T Services 78.5%
Element Fleet Corp. EFN-T Transportation 72.3%
Canada Goose Inc. GOOS-T Clothing 71.1%
Chartwell REIT CSH.UN-T Health Care 71.0%

Source: IHS Markit

Most of the large increases occurred from small short positions, so those cases should not necessarily be viewed as an indication of overly negative sentiment. One increase from a fairly large short position was recorded by Element Fleet Management Corp., a financial company providing services in the field of vehicle-fleet leasing and management. There were some troubles earlier in 2018, and recently, when the company issued $300-million of additional shares and cut its dividend by 40 per cent. On the positive side, the company generates a lot of free cash flow, and some insider buying has occurred.

The third table shows the 20 companies with the largest monthly decreases in short interest. Companies with less than $500-million in annual sales are excluded to keep table entries from filling up with micro-sized companies.

The 20 companies with the biggest decreases in percentage of shares on loan 

Company Ticker Sector Change in percentage of borrowed shares from month ago
BRP Inc. DOO-T Cons. Durables -81.6%
Choice Properties REIT. CHP.UN-T Real Estate -78.5%
Meg Energy Corp. MEG-T Energy -76.9%
Parkland Fuel Corp. PKI-T Energy -73.3%
Methanex Corp. MX-T Materials -66.6%
Allied Properties REIT AP.UN-T Real Estate -65.9%
Maple Leaf Foods Inc. MFI-T Food -62.8%
Kirkland Lake Gold Ltd. KL-T Materials -60.8%
WSP Global Inc. WSP-T Capital Goods -53.2%
CIBC Bank CM-T Banks -50.2%
National Bank Of Canada NA-T Banks -49.5%
Stars Group Inc. TSGI-T Cons. Services -42.1%
Cogeco Communications Inc. CCA-T Media -42.0%
Encana Corp. ECA-T Energy -41.9%
First Capital Realty Inc. FCR-T Real Estate -40.8%
Quebecor Inc. QBR.B-T Media -39.8%
Intact Financial Corp. IFC-T Insurance -39.6%
Turquoise Hill Resources Ltd. TRQ-T Materials -38.4%
Granite REIT GRT.UN-T Real Estate -38.3%
Imperial Oil Ltd. IMO-T Energy -38.1%

Source: IHS Markit

Most of the large decreases occurred from small short positions, so the changes should not be viewed as overly bullish. There was one notable case of a decrease from a large short position: media firm Quebecor Inc. The percentage of its shares sold short fell by well over a third during the month, to stand at 13.1 per cent as of Oct. 18. But this too was not grounds for much concern.

Here’s why: Quebecor’s large short position has mainly reflected a hedging operation on its convertible bonds. However, a recent conversion by the company of the debt into shares removed the need to hedge for many of the bond holders, leading to the closing out of many short positions.

The fourth table is compiled from data provided by Interactive Brokers. It lists the 20 companies with the highest cost to borrow shares. The cost to borrow is a useful indicator of bearish sentiment when the number of loanable shares is small and short sellers reveal their views more through how much borrowing costs are bid up rather than the number of shares borrowed.

The 20 most expensive stocks to borrow in Canada 

Company Ticker Industry Cost to borrow (annualized)
Mega Uranium Ltd. MGA-T Mining 97.6%
Abattis Bioceuticals Corp. ATT-T Marijuana 56.6%
Engagement Labs Inc. EL-T Tech 56.6%
Acasti Pharma Inc. ACST-T Pharma 54.3%
Midas Gold Corp. MAX-T Mining 50.8%
Royal Nickel Corp. RNX-T Mining 46.4%
Newrange Gold Corp. NRG-T Mining 45.8%
Aleafia Health Inc. ALEF-T Pharma 43.1%
Antibe Therapeutics Inc. ATE-T Pharma 39.0%
Auxly Cannabis Group Inc. XLY-T Marijuana 38.1%
Lithium Americas Corp. LAC-T Mining 37.5%
Titan Medical Inc. TMD-T Marijuana 36.4%
Aeterna Zentaris Inc. AEZS-T Pharma 35.7%
Resverlogix Corp. RVX-T Biotech 35.5%
Zargon Oil & Gas Ltd. ZAR-T Oil & Gas 35.1%
Emblem Corp. EMC-T Marijuana 34.2%
Cronos Group Inc. CRON-T Marijuana 34.2%
Cequence Energy Ltd. CQE-T Oil & Gas 33.4%
FSD Pharma Inc. HUGE-T Pharma 32.6%
MPX Bioceutical Corp. MPX-T Pharma 30.6%

Source: Interactive Brokers

There are five marijuana companies on the table this month. This is somewhat high but still fewer than in the spring and summer months when at one point, nearly half of the entries were from the sector. The downtrend may continue in months ahead, now that legalization has arrived and opened the door for institutional investors to buy marijuana stocks.

Since they are the major supplier of loanable shares in the market, institutional investors buying pot stocks will boost the supply of shares available for borrowing. This could take some pressure off borrowing rates in the sector.

It is also worth mentioning that the cost-to-borrow table covers only companies listed on domestic exchanges, so Canadian companies may not show up if they are listed solely on U.S. exchanges. An example is marijuana company Tilray Inc., headquartered in Nanaimo, B.C. but listed on the Nasdaq. If Tilray had been included on the table, it easily would have laid claim to the top spot in recent months. As of mid-October, the cost to borrow shares was over 100 per cent on an annualized basis.

Larry MacDonald is an economist, author and financial writer.

Interact with The Globe