Short Sellers Face Billions in Losses in 2023
Short sellers in the United States and Canada had a tumultuous year in 2023, facing significant losses across multiple sectors.
Casey Parker
- 2024-01-05
- Updated 10:54 AM ET
(NewsNibs) - In a striking turnaround, short sellers lost $194.9 billion this year, contrasting sharply with the $299.1 billion they gained in 2022. This marked a substantial offset of more than two-thirds of their previous gains. The technology and consumer discretionary sectors were notably hard-hit, with short sellers experiencing their greatest financial setbacks in these industries.
Sectors and Stocks Leading the Reversal
The Vanguard Information Technology ETF (VGT) and the Consumer Discretionary Select Sector SPDR Fund (XLY) were prominent contributors to these losses, advancing 44.7% and 33.4%, respectively. Standout losses for short sellers were recorded in Tesla Inc (TSLA), Nvidia Corp (NVDA), and Apple Inc (AAPL), which precipitated sizable net losses of $12.2 billion, $11.2 billion, and $7.3 billion each. Furthermore, the iShares Semiconductor ETF (SOXX) experienced a surge of 65% in 2023, exacerbating the challenges faced by short sellers in the semiconductor industry.
Cryptocurrency Shorts and Banking Sector Gains
Short selling did not prove profitable within the cryptocurrency sector either, with losses amounting to $4.9 billion from Coinbase Global Inc (COIN) alone, as its stock impressively climbed by 341%. Despite the bleak overall picture for short sellers, some profits were gleaned from the banking sector's instability. The collapses of First Republic Bank and Silicon Valley Bank allowed short sellers to capitalize with gains of $1.63 billion and $1.06 billion, respectively. In the pharmaceutical space, Moderna (MRNA) and Pfizer (PFE) provided short sellers with $1.2 billion and $990.4 million in net gains, respectively.
Looking Ahead for Short Sellers
The startling losses of 2023 emphasize the volatile nature of short selling as an investment strategy. While the unpredictable market can lead to significant gains, as was the case in 2022, the tide can turn quickly, delivering losses that can more than erase prior profits. Short sellers will likely continue to navigate the market with caution in light of this past year's financial challenges.
