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It’s not unusual to find people bemoaning the existence of short sellers on the HotCopper forum threads, especially so if those short sellers are actually piling into a darling stock. (That’s not always the case).
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Despite the fact that short sellers ultimately provide a valuable service to the market ecosystem – vultures are important for they help stop the spread of pathogens – their reputation as villains is part of a rich 100-year tradition going back to before the Great Depression.
Sometimes, however, it’s hard to tell what short sellers are thinking, and it’s not unheard of that they may, in fact, be behaving in a villainous way.
Such existential mystery was the case for some investors looking at IperionX (ASX:iPX) on Friday, a company that is the ASX’s only real U.S.-based titanium producer, a metal that Australia itself does not produce.
On Friday, the company announced the U.S. Department of War (formerly Department of Defence) has ultimately thrown another US$25M in funding at IperionX to continue producing titanium in the U.S., a metal which – you probably guessed it already – is crucial in defence manufacturing given its reputation as a tougher-than-most metal.
However – and here’s the kicker – despite a recent drop-off in pressure, shorters continue to cover more than 5% of IperionX shares on issue. The question many are asking themselves Friday is whether they know something retail investors don’t.
That’s hard to figure out, and by nature it’s a fairly conspiratorial way of thinking – but it would be foolish to suggest Wall Street collusion doesn’t occur, and it’s well known that institutions broadly love retail investors for exit liquidity, setting up a familiar David vs Goliath story in the minds of many.
For now, short sellers (who aren’t playing both sides) may be bemoaning Friday’s news, which pushed IperionX shares up another +6% to $7.70/sh, giving the company a $2.6B market cap. Despite getting slaughtered around Liberation Day, IPX has since recovered and then some – 1Y returns are up +140%, and the company is currently outperforming the ASX200 by around the same measure.
Which could be exactly why short sellers are paying attention, and nothing more – hark your mind back to DroneShield’s run through 2024 when revenue and market cap became so disparate that even true believers were worried about valuations.
IPX last traded at $7.70/sh.
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