ShortData Recap August 5th, 2018

Suncor Energy

Suncor Energy had one of the highest short traded values when we recapped two weeks ago, but now they are right on top. With a short traded value of more than $756 million, they are far and away the most doubted security on the TSX. Shorting major North American oil companies right now is not an uncommon play, as individuals such as Donald Trump are taking a hard line on reducing the price of oil, but Suncor has a very specific problem when it comes to any impending decline in oil prices. While their second-quarter profits for 2018 were beyond any that they’ve previously achieved, those profits were almost entirely secured by better margins that resulted from a higher price of oil. Suncor actually produced less oil than usual in this quarter of banner profits. Add the fact that they’ve announced that they will be planning to reduce production going forward by 15,000 barrels a day, and you can see why people are taking a short position. Suncor’s business model isn’t as sensitive to the price of oil as other oil production companies, but the high probability of lower oil prices in the future combined with reduced output puts them in an extraordinarily precarious position for an organization looking to continue improving upon their quarterly profits.

Royal Bank of Canada

The Royal Bank of Canada also had one of the highest short traded values the last time we did a recap, but in the last two weeks, there has been a tremendous increase in short interest in the Canadian banking giant. The short traded value of RBC is currently just shy of $700 million and increasing interest rates may not be to blame. If anything, those increases driven by the Bank of Canada might be the only thing keeping RBC’s mortgage business in the black. It looks like what’s really driving the lack of confidence in RBC is the combination of the implementation of the new B20 mortgage guidelines and a general decrease in the housing market activity in Canada. According to the Canadian Real Estate Association, prices and listings are both down, and overall real estate market activity in Canada is down over 10% from this time last year. If market activity is down and regulations are making it even harder for new buyers to make their way into the market, it’s no wonder that one of the biggest mortgage providers in Canada is being shorted with such volume.

Organigram

Moving away from the TSX and heading to the TSX Venture we see Organigram Holdings Inc. leading the way with the highest short trading value on the exchange. Two weeks ago they had a short traded value of $4,268,856, but that number has recently risen to $17,308,966. It’s odd to think that a company already in ownership of license to grow medical marijuana in Canada would have the highest short trading value on the TSX Venture, but recent events have some people thinking that this will be a good play in the short term. First of all, with the hype surrounding the recent passing of legalized recreational marijuana in Canada, Organigram has seen a fairly significant jump in their share price. After hanging around $4.50 for nearly a month, their price jumped above $5.00 on August 1st. A lot of short sellers are probably just waiting for the correction. Others are more likely interested in the significant cash outlay that the company will be making in the coming months. They are expanding an existing facility and building a brand new one that will aim to be up and running by April of 2019. While expansion is often a good sign, Organigram will be spending more than $100 million on these expansion plans and that likely has a lot of investors worried.