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Tesla, Amazon, and Apple led short bets in June — but short interest declined overall

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Hypergrowth tech stocks led last year’s market (and several years prior) to all-time highs.

In 2022, some of the same companies proved to be a lucrative trade again — but this time among short sellers.

Research from S3 Partners Research (S3) showed that in June, Tesla (TSLA), Amazon (AMZN), and Apple (AAPL) were the most profitable shorted stocks, each churning out mark-to-market profits of more than $1 billion for traders betting on their declines.

HANGZHOU, CHINA - JUNE 19, 2022 - A Tesla logo is pictured in Hangzhou, East China's Zhejiang Province, June 19, 2022. Tesla has raised prices for electric cars by a large margin. (Photo credit should read CFOTO/Future Publishing via Getty Images)
A Tesla logo is pictured in Hangzhou, East China's Zhejiang Province, June 19, 2022. (Photo credit should read CFOTO/Future Publishing via Getty Images)

Short sellers typically borrow shares of a company they speculate will decline and sell them in anticipation the stock price will fall, with a goal of purchasing them back at a lower price and pocketing the difference.

The winning streak for technology shorts came amid a sharp market decline in the broader market that saw the Nasdaq shed 8.7% during the month and log its worst first six months of the year on record.

As technology stocks tanked during a rout in the sector this year, bets against some of the biggest companies in the space churned out roughly $20 billion in profits for short sellers, per S3’s data. In the prior two years, bets against mega-cap tech stocks saw a $36 billion loss as these companies rallied sharply.

The downturn in U.S. equities more generally in 2022 has been a win for traders betting against the stock market. U.S. equity short-sellers were up 30% for the year through the end of June, according to the financial data and analytics firm.

Tesla, Amazon, and Apple were among the most profitable shorted stocks in June 2022.
Tesla, Amazon, and Apple were among the most profitable shorted stocks in June 2022.

And while these traders continue to outperform the broader markets, short interest declined by $73.5 billion in June, from $981.6 billion in May to $908.1 billion. Investors continued to place new short bets but scaled back to $20 billion last month, compared to $65.5 billion of additional short selling in May.

“This may be a sign that short sellers are sensing that a market bottom is near, and they are satisfied seeing their overall short exposure shrink slightly as the market value of their existing short positions decline ahead of what may be a possible market rally,” S3’s Ihor Dusaniwsky and Matthew Unterman stated in the report.

Stocks have come off of their mid-June lows but made little ground overall compared to their broader declines, with some strategists warning recent gains may be a fleeting bear-market rally.

A rally of more than 6% the week of June 24 made some investors hopefully the bottom was in, but stocks pulled back again last week for an 11th week of losses over the past 13 weeks.

"With a pocketful of mark-to-market profits already earned by short sellers they will be able to weather short-term bear rallies and hold onto their positions without being squeezed," Dusaniwsky and Unterman noted. "It will take a more prolonged rally to eat into those unrealized profits and force short sellers to be squeezed out of their trades."

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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