This content is from: Portfolio

Short Sellers Made Bank in 2022

Tesla tops the list for short seller profits, while Carvana offered the biggest percentage gain for shorts.

For the first time since 2018, short sellers as a group were in the black last year.

U.S. equity and ADR short sellers made $300 million in 2022, which comes to a 30.83 percent gain for the year, according to S3Partners.

Out of all the companies targeted by short sellers last year, the formerly high-flying tech and growth stocks had the furthest to fall. Tesla, Amazon, and Meta Platforms (Facebook) topped the list of money makers for the shorts.

Short sellers raked in the most money on Elon Musk’s electric automaker Tesla, gaining $15.85 billion — but it was the online auto dealer, Carvana, that offered the biggest gain for short sellers on a percentage basis. Carvana shorts had a 377.85 percent gain, for $4.33 billion — the fifth-most profitable on an absolute dollar basis. In contrast, Tesla shorts were up 83.84 percent.

Amazon short sellers came in second to Tesla in total dollars earned, with $6.37 billion, or a 63.43 percent gain. Meta shorts earned $4.43 billion, a 104.96 percent gain.

The crypto meltdown also played into the short sellers’ hands. Coinbase Global earned short sellers $2.23 billion, for a 142 percent gain.

Other big winners for short sellers include meme stock AMC Entertainment, which earned short sellers a little more than $2 billion — and a healthy 154.26 percent gain.

Sea Ltd., a Southeast Asian online media and e-commerce pioneer that had previously been a hedge fund favorite, earned the shorts a 185 percent gain, or $3.48 billion.

The financial sector also offered some interesting short opportunities. Sofi Technologies, which Chamath Palihapitiya famously took public via one of his special purpose acquisition companies, earned shorts $1.13 billion, for a 136.82 percent gain. Private equity giant Blackstone was another popular short, earning short sellers a 57 percent gain, which amounted to $810.75 billion.

The last year that short sellers made overall profits was 2018, when they recorded a 8.92 percent gain, according to S3 Partners. But the following period was particularly brutal, with short sellers down double digits in each year from 2019 through 2021. The shorts lost 22.12 percent in 2019, 27.13 percent in 2020, and 12.58 percent in 2021. Their five-year average was a loss of 4.42 percent. In contrast, the S&P 500 index gained an average 9.27 percent during that time period.

S3 Partners’ Ihor Dusaniwsky and Matthew Unterman contend that short sellers have still performed well over the past five years, “earning a higher positive return in down years while not posting as large a negative return on up years.”

In other words, even though the broader market was up more than 9 percent over the past five years, expert stock picking enabled short sellers to lose only 4.42 percent — less than half much as the overall stock market gained.

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