It’s incredibly difficult to make big money shorting stocks. You need a strong conviction in your bets. You need to have a firm belief that something is cooking in the company that most people overlook or choose to ignore. Those shorting stocks during the COVID-19 pandemic have made more than $50 billion in profits.
Here we take a look at the top shorts of each year between 2013 and 2020. The list is based on data from Activist Insight Shorts. Josh Black of Activist Insight has given double credit where two short sellers were first and second on the same idea, though their campaign returns might be slightly different.
Short selling is when you bet against a stock and profit when it falls. Short sellers borrow shares from investors and then sell them at market price. They expect the stock to decline by a specified future date (the expiration date). If/when the stock tumbles, the short seller buys it back at ridiculously low prices to return to the investor from whom they had borrowed. The short seller pockets the difference. But sometimes shorting backfires when the stock in question skyrockets.
These are the top shorts between 2013 and 2020 (so far):
2013: Miller Energy Resources Inc.
Short seller The Street Sweeper released an explosive report on Miller Energy Resources in 2011, questioning its accounting practices. The East Tennessee-based oil and gas exploration company slammed the report. Miller CEO Scott Boruff said The Street Sweeper was using deceptive and manipulative tactics to bring down the stock. The Street Sweeper announced in December 2013 that it was shorting Miller Energy. The campaign return stood at a staggering 99.92%. The Securities and Exchange Commission (SEC) found that Miller and its executives had “violated the federal securities laws by materially overstating the value of certain oil and gas assets acquired in Alaska on its financial statements.”
2014: Apptigo International Inc.
Apptigo was a technology company engaged in the design and development of smartphone apps. It was the company behind the SCORE match-making app. Short seller GeoInvesting (FG Alpha Management) accused that the company’s leadership was engaged in pumping up the stock around the same time Apptigo was hailed as “The #1 Mobile App Tech Stock of 2014.” GeoInvesting’s short bet gave 99.96% in campaign returns.
2015: Adeptus Health Inc
Headquartered in Irving, Texas, Adeptus operates free-standing emergency rooms. Short seller Long-Short Value announced in September 2015 that it was shorting the stock. By early 2016, Adeptus had the highest short interest among the US-listed stocks. The healthcare company filed for Chapter 11 bankruptcy in 2017 amid soaring debt and falling demand. Adeptus emerged from the bankruptcy a few months later after completing its financial restructuring. The campaign returned a handsome 98.87%.
2016: Tech Pro Technology Development Ltd.
Tech Pro Technology is a Hong Kong-based manufacturer of LED lighting products and accessories. In June 2016, GeoInvesting announced that it was shorting the stock. GeoInvesting said at the Sohn Conference Hong Kong that the stock was “grossly overvalued” and “detached from the reality.” A little over a month later, Glaucus Research Group announced that it was also shorting Tech Pro Technology. Both short sellers generated about 96.3% in campaign returns.
2017: Helios and Matheson Analytics Inc.
New York-based Helios and Matheson was a data analytics company. It acquired a controlling stake in MoviePass, a movie subscription service, in 2017. MoviePass was burning cash at an unprecedented pace. The Street Sweeper announced in September 2017 that it was shorting Helios and Matheson. Its shares fell from $38 in October 2017 to $0.21 in July 2018. The company said in January 2020 that it would file for Chapter 7 bankruptcy and liquidate its assets.
2018: Orchids Paper Products Company
Orchids Paper Products is a manufacturer of consumer tissue products. In 2012, Forbes magazine named it among “America’s Best Small Companies.” The company started facing financial challenges in 2016 due to rising input costs and increasing competition. But the CEO’s compensation remained much higher than the industry average. White Diamond Research announced in December 2018 that it was shorting the stock with 100% downside target. The campaign returned 99.7%.
2019: Helius Medical Technologies, Inc
Helius is a neurotechnology company focused on neurological wellness. In January 2019, White Diamond Research published an article on Seeking Alpha claiming Helius’ only product was an “ineffective device.” The short seller also alleged that Helius Medical’s founders had “a history of questionable marketing practices.” White Diamond even sent a letter to the USFDA, urging them to reject the company’s marketing application for the PoNS device. The campaign returned 94.93%.
2020: Luckin Coffee Inc.
Luckin Coffee Inc. was hailed as the Starbucks of China. Its growth rate had shocked the Wall Street. In January 2020, Muddy Waters Research published a scathing report saying Luckin Coffee was a “broken business” engaged in an accounting fraud. Just days later, J Capital Research confirmed that it was also shorting the stock. When Muddy Waters and J Capital both are shorting a stock, you wouldn’t want to be on the other side of the table. After its fraudulent accounting practices came to light, the Chinese company fired its CEO and COO, and Nasdaq halted the trading of its shares.