Why are Flight Centre shares still the most shorted on the ASX?

The Flight Centre Travel Group Ltd (ASX: FLT) share price has been on a tear in recent weeks. Flight Centre shares gained an impressive 18% or so over the month of October. Indeed, the company is up more than 20% since 3 October.

And yet, Flight Centre is still on the most-shorted ASX shares list. Just yesterday, my Fool colleague James covered the ASX’s most short-sold shares. And there Flight Centre was. In the number one position with 15.3% of its share count shorted.

So why might this be the case? Well, in simple terms, there are still many investors (or a few with deep pockets) betting that there is more pain ahead for the Flight Centre share price.

Short selling works by allowing investors to borrow shares and sell them with a promise of returning that same number of shares to the original owner at a later date.

If the share price of the shorted share falls during this borrowing period, the short seller makes money. It can be thought of as the opposite of investing in a company, sometimes called ‘going long’.

Why are Flight Centre shares getting short-sold?

So Flight Centre’s presence on the most shorted list tells us that there are significant investors out there who are anticipating the company’s shares are in for a rough time over the next few months at least.

Until October, Flight Centre shorters would have been doing very well. Between the start of 2022 and 3 October, Flight Centre shares dropped around 25% in value. Even after the stellar month the company enjoyed during October, the ASX 200 travel share remains down 9.7% in 2022 thus far.

Perhaps some investors are anticipating the travel sector isn’t in for as rosy a recovery as some suggest.

As we covered last week, booking statistics have reportedly shown “an influx of new business travellers in the construction, engineering, and healthcare sectors”.

Construction workers are reportedly Flight Centre’s ” third most important source of passengers”. So it’s almost certainly good news for the company that business travel in this industry has grown by 145% against the numbers seen in 2019.

So perhaps short sellers are missing something?

Looking at Flight Centre’s calendar, the company is scheduled to hold its next annual general meeting later this month on 14 November. It’s possible short sellers are betting that the company will have some bad news to tell the markets at this AGM.

Whatever the reasons for this company’s high short-seller interest right now, only time will tell if this pessimism is well founded.

In the meantime, Flight Centre has just closed at a share price of$16.92, up 1.62% for the day.

The post Why are Flight Centre shares still the most shorted on the ASX? appeared first on The Motley Fool Australia.

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More reading

• Here are the 10 most shorted ASX shares
• If you’d spent $1,000 buying Flight Centre shares at the start of October, guess how much you’d have now
• Why is the Qantas share price so volatile today?
• Could this tailwind fuel Flight Centre’s share price into the future?
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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