Short Sellers Reap $13 Billion on Winner-Take-All Market Gap
- Bets against smaller-cap stocks pay off despite broader rally
- Shows gulf that opened as big tech stocks drove market’s gains
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Short sellers are raking in profits by betting against a part of the US equity market overlooked by most investors: small-cap stocks.
The group has seen paper profits of nearly $13 billion this year by wagering on a drop in the prices of small-, micro- and nano-cap shares, according to an estimate by S3 Partners LLC based on the average amount of short positions in the market. That’s in stark contrast to the roughly $140 billion in losses from short sales of mid-, mega- and large-cap stocks, which rallied for much of the year as the economy defied gloomy forecasts, the Federal Reserve edged closer to ending its interest-rate hikes and breakthroughs in artificial intelligence triggered a stampede in tech stocks.