The market has been continuing its volatility and downtrend trend that started this month. The S&P 500 is down 1.5% so far for the day. Investors are facing uncertainty due to a murky economic outlook and the upcoming presidential election. The markets are still down after the Fed’s latest decision to…
keep interest rates near zero until inflation increases. Apparently, investors are unhappy that the Fed isn’t doing anything else. In this backdrop, a few stocks have recently seen large short positions taken.
Investors’ bearish sentiments are often seen through their short-selling activity as they bet against stocks based on either negative news or if they believe the stock has become overvalued. The bullish crowd argue that the motivation of activist short-sellers is to manipulate the market and profit from a manufactured decline in the stock prices. Short-sellers argue that they help the market by unmasking frauds.
GSX Techedu Inc. (GSX), Nikola Corp. (NKLA), and Inovio Pharmaceuticals, Inc. (INO) are three stocks that were recently shorted by famous short sellers.
GSX Techedu Inc. (GSX – Get Rating)
GSX is a technology-driven education company that provides online K-12 after-school tutoring services in the People’s Republic of China. The company has confirmed that it is being investigated by the U.S. Securities and Exchange Commission (SEC) after investors accused the firm of inflating its sales.
GSX reported revenue of $1.65 billion for the second quarter, growing 367% compared to the year-ago quarter. Enrollment in its K-12 online course increased more than 300% year-over-year. Famed short-seller Andrew Left of Citron Research believes that the company’s suspicious enrollment numbers stood out in the highly competitive online education industry, and hence, he is shorting the stock. Left accused, “If the audits are done properly it will go to zero and delist.”
In May, short-seller Carson Block and his firm Muddy Waters Research claimed that at least 70% of the company’s users are fake and concluded that it is a near-total fraud. The Trump administration also announced earlier that it is looking to ban Chinese companies with shares traded on US stock exchanges unless they comply with American accounting requirements.
The stock has gained as high as 500% this year. However, the stock has tanked 20.6% since hitting an all-time high on August 6th this year. GSX has a short float of 19%, indicating that the stock has been highly shorted. The stock closed yesterday’s trading session at $104.17, gaining more than 376% year-to-date.
According to the POWR Ratings, GSX has an overall “C” rating. It also has a grade of “C” for Trade Grade and Buy & Hold Grade, and a “D” for Industry Rank.
Nikola Corp. (NKLA – Get Rating)
NKLA operates as an integrated zero-emissions transportation systems provider. It designs and manufactures battery-electric and hydrogen-electric vehicles, drivetrains, energy storage systems, and hydrogen fueling station infrastructure. Investors have accused NKLA of being “an intricate fraud built on lies” based on false statements by Nikola Founder, Trevor Milton.
Short-selling research firm Hindenburg has recently accused NKLA of…
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