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Short sales on the TSX: What bearish investors are betting against

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Except for a few rallies along the way, short sellers on the Toronto Stock Exchange (TSX) have been in full retreat in recent months – as highlighted by the short position in the iShares S&P/TSX 60 exchange-traded fund (ETF).

On Nov. 30, it stood at 70 million units, down considerably from 120 million units in July.

Investment Industry Regulatory Organization of Canada (IIROC)

Bearish bets at the sector level

The three most shorted sectors as of Nov. 30 were preferred shares, energy companies and banks, as represented, respectively, by the BMO Laddered Preferred Shares, iShares S&P/TSX Capped Energy and BMO Equal Weight Banks ETFs.

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Some sectors have managed to show increases in short interest since Aug. 31. The biggest were: BMO MSCI Emerging Markets (1,893.1 per cent), iShares S&P/TSX Capped Financials (113.0 per cent) and iShares Canadian Corporate Bond (85.4 per cent).

The 10 most short sectors on the TSX (as of Nov. 30).

ETF # of units short as of Nov. 30 # of units short as of Aug. 31 % change from Aug. 31 % of units short as of Nov. 30
BMO Laddered Preferred Shares ZPR-T 11,705,917.00 12,810,920 -8.6% 5.5%
iShares S&P/TSX Capped Energy XEG-T 9,120,630.00 9,173,571 -0.6% 8.0%
BMO Equal Weight Banks ZEB-T 4,558,415.00 4,875,785 -6.5% 9.5%
iShares S&P/TSX Capped REIT XRE-T 4,523,625.00 3,213,590 40.8% 6.5%
Horizons Marijuana Life Sciences HMMJ-T 1,249,040.00 1,425,587 -12.4% 2.3%
iShares S&P/TSX Global Gold XGD-T 890,653.00 833,063 6.9% 1.4%
iShares Canadian Corporate Bond XCB-T 846,084.00 456,429 85.4% 1.1%
iShares Core MSCI EAFE XEF-T 796,969.00 976,579 -18.4% 0.6%
BMO MSCI Emerging Markets ZEM-T 768,769.00 38,572 1893.1% 0.8%
iShares S&P/TSX Capped Financials XFN-T 548,867.00 257,671 113.0% 2.0%

Source: IIROC

Consultation paper on activist short sellers

Canadian Securities Administrators (CSA), which represents provincial securities regulators, released a consultation paper on activist short sellers on Dec. 3. The consultation paper reports that activist short sellers have launched 113 campaigns against 73 Canadian companies since 2010.

Campaigns by activist short sellers against Canadian companies past 10 years

CSA Consultation Paper 25-403: Activist Short Selling

As for the charge that activist short sellers “distort and short”, the CSA paper states that a U.S. study “found that separate investigations by the Securities and Exchange Commission and the Department of Justice reached similar conclusions as activist short sellers in 90% of the [U.S.] campaigns.” Sources are cited on other issues, including my Globe and Mail article, “Regulations to rein in short-sellers must not undercut activists’ positive effects”

Non-reporting of foreign short sales

A report by the Investment Industry Regulatory Organization of Canada publishes the number of shares short for public Canadian companies twice a month. However, it does not include short sales of Canadian stocks trading in other countries. This omission substantially understates short selling activity and bearish sentiment, according to databases developed by S3 Partners.

They show that close to 900 Canadian firms have foreign short sales, mostly in the U.S. Not only are inter-listed companies shorted in other countries but so are Canadian companies listed exclusively in foreign jurisdictions. Furthermore, many companies listed solely in Canada are shorted in foreign over-the-counter markets. The S3 Research data also reveal that well over a third of large-cap Canadian companies have more than 50 per cent of their short sales outside of Canada; the value is US$12.5-billion for the top 30 companies.

Top 30 companies with foreign short interest exceeding 50% of total

Company U.S. ticker Short interest outside Canada (in U.S. millions) Foreign short sales as % of total Location of foreign exchange
Shopify Inc. SHOP-N $1,637.20 89.7% U.S.
Barrick Gold Corp. GOLD-N $1,169.40 86.2% U.S. & U.K.
Canopy Growth Corp. CGC-N $1,031.60 77.2% U.S.
Brookfield Asset Mgt. BAM-N $842.00 73.6% U.S.
Lululemon Athletica LULU-Q $769.90 100.0% U.S.
Restaurant Brands Intl. QSR-N $614.90 81.5% U.S.
Canadian Tire Corp. CDNAF $466.10 69.2% U.S.
Aurora Cannabis Inc. ACB-N $480.10 87.2% U.S.
First Majestic Silver Corp. AG-N $487.20 92.2% U.S.
Kirkland Lake Gold Ltd. KL-N $339.40 91.2% U.S. & U.K.
Nutrien Ltd. NTR-N $253.20 56.7% U.S.
Franco-Nevada Corp. FNV-N $286.70 67.1% U.S.
Cronos Group CRON-Q $351.10 86.6% U.S.
Ballard Power Systems BLDP-Q $364.80 93.0% U.S.
Imperial Oil Ltd. IMO-N $243.10 70.0% U.S.
Ovintiv Inc. OVV-N $322.10 94.9% U.S.
Canada Goose Holdings. GOOS-N $299.90 90.5% U.S.
Lundin Mining Corp. LUNMF $197.50 79.5% U.S. & Sweden
Open Text Corp. OTEX-Q $238.60 78.0% U.S.
Lightspeed Inc. LSPD-N $180.50 59.0% U.S.
Aphria Inc. APHA-Q $241.00 81.3% U.S.
Blackberry Ltd. BB-N $203.80 72.9% U.S.
Teck Resources Ltd. B TECK-N $181.30 66.1% U.S.
Tilray Inc. TLRY-Q $256.30 100.0% U.S.
GFL Environmental Inc. GFL-N $179.00 82.6% U.S.
Canadian Solar Inc CSIQ-Q $208.00 100.0% U.S.
Gildan Activewear. GIL-N $135.30 68.5% U.S.
Cameco Corp. CCJ-N $148.30 78.9% U.S.
First Quantum Minerals FM-N $107.50 57.3% U.S.
SNC-Lavalin Group SNCAF $135.90 78.4% U.S.
Total $12,371.40

Source: S3 Partners

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Cineplex reports $24.7M Q3 loss on Competition Tribunal penalty

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TORONTO – Cineplex Inc. reported a loss in its latest quarter compared with a profit a year ago as it was hit by a fine for deceptive marketing practices imposed by the Competition Tribunal.

The movie theatre company says it lost $24.7 million or 39 cents per diluted share for the quarter ended Sept. 30 compared with a profit of $29.7 million or 40 cents per diluted share a year earlier.

The results in the most recent quarter included a $39.2-million provision related to the Competition Tribunal decision, which Cineplex is appealing.

The Competition Bureau accused the company of misleading theatregoers by not immediately presenting them with the full price of a movie ticket when they purchased seats online, a view the company has rejected.

Revenue for the quarter totalled $395.6 million, down from $414.5 million in the same quarter last year, while theatre attendance totalled 13.3 million for the quarter compared with nearly 15.7 million a year earlier.

Box office revenue per patron in the quarter climbed to $13.19 compared with $12 in the same quarter last year, while concession revenue per patron amounted to $9.85, up from $8.44 a year ago.

This report by The Canadian Press was first published Nov. 6, 2024.

Companies in this story: (TSX:CGX)

The Canadian Press. All rights reserved.

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Restaurant Brands reports US$357M Q3 net income, down from US$364M a year ago

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TORONTO – Restaurant Brands International Inc. reported net income of US$357 million for its third quarter, down from US$364 million in the same quarter last year.

The company, which keeps its books in U.S. dollars, says its profit amounted to 79 cents US per diluted share for the quarter ended Sept. 30 compared with 79 cents US per diluted share a year earlier.

Revenue for the parent company of Tim Hortons, Burger King, Popeyes and Firehouse Subs, totalled US$2.29 billion, up from US$1.84 billion in the same quarter last year.

Consolidated comparable sales were up 0.3 per cent.

On an adjusted basis, Restaurant Brands says it earned 93 cents US per diluted share in its latest quarter, up from an adjusted profit of 90 cents US per diluted share a year earlier.

The average analyst estimate had been for a profit of 95 cents US per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 5, 2024.

Companies in this story: (TSX:QSR)

The Canadian Press. All rights reserved.

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Electric and gas utility Fortis reports $420M Q3 profit, up from $394M a year ago

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ST. JOHN’S, N.L. – Fortis Inc. reported a third-quarter profit of $420 million, up from $394 million in the same quarter last year.

The electric and gas utility says the profit amounted to 85 cents per share for the quarter ended Sept. 30, up from 81 cents per share a year earlier.

Fortis says the increase was driven by rate base growth across its utilities, and strong earnings in Arizona largely reflecting new customer rates at Tucson Electric Power.

Revenue in the quarter totalled $2.77 billion, up from $2.72 billion in the same quarter last year.

On an adjusted basis, Fortis says it earned 85 cents per share in its latest quarter, up from an adjusted profit of 84 cents per share in the third quarter of 2023.

The average analyst estimate had been for a profit of 82 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 5, 2024.

Companies in this story: (TSX:FTS)

The Canadian Press. All rights reserved.

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