Short selling has become a hot topic on Wall Street in 2021 after communities of online traders on Reddit and other social media platforms conducted a series of targeted buying campaigns in some of the market’s most heavily shorted stocks. As a result, the stock prices of so-called “meme” stocks, such as GameStop (ticker: GME), have skyrocketed this year due to a phenomenon known as a short squeeze.
Most investors buy shares of stock in the hopes that its share price will rise over time. However, short sellers take the opposite side of the trade. Short sellers identify stocks that they believe are overpriced and bet on their share prices to fall. Short sellers often target companies that they believe have businesses in terminal decline. Other times, short sellers simply bet on pullbacks in overheated momentum stocks that they believe have become temporarily overpriced.
Rising short interest can be a red flag for investors that something is seriously wrong with a company. However, it can also set up a stock like GameStop for a major short squeeze. A short squeeze is a large, short-term spike in a stock’s share price triggered when a large number of its short sellers are forced to exit their positions all at once by buying shares of stock.
Matthew Unterman, director at S3 Partners, says these five stocks are the most heavily shorted stocks of the past 30 days heading into April:
Vici Properties is a real estate investment trust that was spun off from casino company Caesars Entertainment (CZR) in 2017. Vici owns 28 casino properties and golf courses and leases the properties out to its operators. In 2020, Caesars accounted for more than 80% of Vici’s rental income.
Vici likely got the attention of short sellers in March when the company announced a $2.25 billion acquisition of Venetian Resorts from Las Vegas Sands (LVS). The deal includes a 30-year triple net lease on the property with an initial annual lease rate of $250 million.
The acquisition will reportedly reduce Vici’s exposure to Caesars down to about 70%, but the company is still heavily exposed to the struggling Las Vegas Strip. Short sellers may believe Vici overpaid for the Venetian given how heavily Vegas was hit by the health crisis and the challenges Vegas faces in coming years from legalized online sports gambling.