For this update on short selling in public Canadian companies, we cover:
- Top short positions
- Top increases in short positions
- Trial of activist short seller Andrew Left (and links to Canada)
- Stocks most at risk for short squeezes
- Most shorted ETFs
- Methodology and sources
Academic studies have found that stocks with large short positions relative to their floats (freely traded shares) tend to underperform — not always, but on average. Investors holding or buying stocks mentioned in this update may thus want to make sure they have done their due diligence.
Top short positions
The table below shows the most shorted Canadian companies as of May 27.
Two fintech companies, Propel Holdings Inc. (PRL-T) and Goeasy Ltd. (GSY-T), have moved higher up on the list of the most shorted companies, into second and third place, respectively. As lenders to individuals not usually serviced by chartered banks, Propel and Goeasy are often the first of creditors to experience a rise in non-performing loans when the economy sours.
A new face on the table is Toronto-based ZenaTech Inc. (ZENA-Q), a small-cap technology company with sales in fiscal 2025 of $9 million and free cash flow of -$41 million. It is pursuing commercial contracts in the area of AI drones, enterprise SaaS and quantum computing.
Top increases in short positions
Changes in short positions can also be informative. A large increase often signals that there is a greater risk of a stock underperforming. Here are the companies with hikes in short positions of more than 200 basis points over the past month.
Docebo Inc. (DCBO-T), which provides cloud-based training programs to organizations, appears on the table for the most shorted stocks, as well as on the table for top increases in short positions. While profitability has grown at Docebo, there has been some customer churn lately, in particular the winding down of business with a human-resources firm and Amazon Web Services. Investors may also be waiting to see if the company’s AI investments can accelerate growth in its competitive market niche of software-based training programs.
Trial of activist short seller Andrew Left (and links to Canada)
Prominent activist short seller Andrew Left of Citron Research went on trial in the United States during May. It was for posting Sell recommendations on some companies that he had sold short, only to quickly reverse the short positions and realize huge gains when his reports caused the stocks to plunge. Several of the trades occurred in Canada.
Some observers may see the trial as providing a verdict on activist short selling. But this kind of trading was not so much on trial as was the failure to disclose. If Mr. Left had properly warned of his trades, there likely would not have been charges laid, at least going by the examples of short sellers who do provide full disclosure.
Activist short sellers don’t always unwind short positions right after issuing Sell reports but when they do, it usually is to minimize risks such as the short squeezes that can arise when their positions become public knowledge. This risk reduction step is crucial to the viability of activist short selling and the deterrence effect it has on fraud and misrepresentation in stock markets.
As mentioned, there were some Canadian connections in Mr. Left’s trial. A prosecution witness claimed that a Sell report issued by Mr. Left in 2018 had misrepresented the distribution agreements of Toronto-based cannabis company Cronos Group Inc. Its shares did rebound after the drop triggered by the report but defense lawyers pointed out that the stock later trended down and is currently trading at the target price that Mr. Left had issued.
Mr. Left and Toronto-based Anson Funds also teamed up on a Sell report prepared under his name, targeting another Canadian cannabis company. Anson Funds put the trade on and said it paid Mr. Left for his services by delivering a share of the proceeds through a third party.
Despite Mr. Left’s denials, prosecutors maintained that payment through a third party was arranged at his request, thus providing evidence of an attempt at concealment. Whatever the case, the issue here again revolves around a lack of disclosure, not activist short selling per se.
Stocks most at risk for short squeezes
When some event or news item causes short sellers to close their positions in a rush, the result can be a spike in the stock price as they hurry to buy and return the borrowed stock. Data firm S3 Partners has created an algorithm, the Short Squeeze Score, to rank companies by the likelihood of a short squeeze, with 100 being the highest level and 0 being the lowest.
Over the past month, there was a relatively large number of companies with high scores for short squeezes. Here are the ones with readings of 75.00 or higher.
Most shorted ETFs
Short positions in exchange-traded funds (ETFs) can provide a picture of bearish sentiment at the sector and stock-market level.
Short selling during May was very high in some ETFs. The S3 version of the percentage of float short was thus used (the S3 version is explained in the Methodology and sources section below). If the S3 version had not been used, the unadjusted short position on the BetaPro Silver 2x Daily Bear would have exceeded 100 per cent, suggesting that naked short selling was occurring when it likely had not.
The short positions with high percentages of float short appear to be attributable mostly to their small floats. One exception is the iShares S&P/TSX Energy ETF (XEG-T), which does have a large float: its elevated short interest may be better explained as a bet on oil-and-gas prices coming down whenever hostilities between Iran and the United States subside.
Methodology and sources
S3 Partners was the main source for short-sales data. It was selected because Canada has many companies interlisted in the U.S. and Canada, and S3 Partners can provide short positions (currency-adjusted) across both countries. Other data sources for short sales data don’t do this.
For the tables, a cutoff was applied to exclude companies whose short positions were small in dollar value. That cutoff is currently set at $1 million. The percentage of a company’s float (freely traded shares) is used to provide one of the better gauges of bearish sentiment.
As S3 Partners states, readings for the percentage of float short significantly overestimate bearish sentiment for heavily shorted stocks. They should be corrected by adding to the float the synthetic long positions created by short sales (when a stock is shorted, it creates two owners of the same shares: the original owner and the buyer of the borrowed stock sold by the short seller).
Note that short positions, regardless of data source or indicator, may not be purely bearish bets because of trades made for hedging or arbitrage reasons.
Larry MacDonald is the author of The Shopify Story and blogs at Shopify’s Journey