Bank of Nova Scotia
For the second time this year, the short trading value of the Bank of Nova Scotia (TSX:BNS.TO), climbed over the $1 billion dollar mark, currently making it the most heavily shorted security on the TSX. The sharp increase in those playing the downside of this particular stock can be most assuredly attributed to the fact that BNS has made yet another sizeable purchase. MD Financial Management, an organization specifically geared towards managing the finances of Canadian physicians, was obtained by BNS at the end of last month for a sum totalling just shy of $2.6 billion. This purchase is just one of several large procurements that have been undertaken by the Canadian bank since the end of 2017, and the reaction that short sellers are having to the news is not inconsistent with previous movements. For example, the other time this year that the short trading value of BNS climbed over that $1 billion mark occurred just after news broke that they were looking to purchase Jarislowsky Fraser Ltd. for $950 million. Following the last surge in February, the short trading value made a significant drop south of $500 million. We’ll have to wait until the end of June to see if this phenomenon repeats itself.
Canadian Pipeline Business
The pipeline business in Canada has also seen a significant increase in short sales as interest rates and increased financial scrutiny threaten to devalue investor staples such as the Transcanada Corporation (TSX:TRP.TO) and Pembina (TSX:PPL.TO). There is talk that the Bank of Canada may raise interest rates this summer and such a shift could potentially move investors off of dividend producing assets like Transcanada and over toward suddenly more lucrative interest-based products. There has also been a rise in the profit analysis of pipeline businesses in Canada ever since the Liberal government made purchase of Trans Mountain. These analyses have not been as favourable as many may have hoped and have revealed business models that rely heavily on financial output for relatively meagre gains. Since the beginning of June, issues such as these have increased the short trading volume of Transcanada and Pembina by a combined total of more than $400 million.
Despite the tremendous short sale increases seen by BNS, TRP, and PPL, it’s Dollarama Inc. (TSX:DOL.TO) that’s been struck by the most significant short sale rise over the last two weeks. Short sale values of this niche retail chain increased more than 70% after news broke of the increased trade tariffs on goods coming from the United States. Dollarama Inc. imports many of their Canadian sold goods from wholesalers south of the border and these tariffs put a damper on their profit margins as well as the retailer’s plans to expand into a web-based sales model that is intended to compete with the likes of Amazon and Costco.