Small-bore investors moved mountains of money last week by short selling shares of GameStop, a once ubiquitous suburban mall fixture that has faded from relevance. Short selling reveals a lot about investor sentiment, and the data below tell us what investors think of airline and travel companies.
Which travel companies are the most hated on Wall Street? The table below tells us exactly that — the higher the percentage, the more bearish the sentiment. American Airlines and global distribution system Sabre draw the most investor skepticism by a wide margin. To a lesser extent, investors also distrust smaller carriers, Spirit and Copa, as well as the smaller cruise lines, Norwegian and Lindblad.
A short sale is a bet that a company’s stock price will decline. The table below shows how many shares have been sold short relative to all available shares in the company. In the case of American Airlines, 153 million shares have been sold short, representing fully one-quarter of the 605 million shares available to trade as of January 27.
It is very expensive to maintain short positions for long periods of time, especially when stock prices rise. Last week, members of an online community attempted to exploit this cost by dog-piling into GameStop stock, forcing up share prices sharply. The hope was that the rapid spike in price would force the short sellers to close their — now very costly — trades by buying back the stock. Those purchases would in turn drive the stock price even higher allowing the early buyers to profit.
The viral success of this strategy led to imitators who scoured the exchanges for stocks with high short interest that they could gang up on. And so American Airlines, with 25% of its stock sold short became a target. As a result shares were up as much as 30% mid-week for no real fundamental reason. This price dislocation is unlikely to be sustained over the coming weeks and months.
|Company||Shares Sold Short as a % of Total Stock Float|
|American Airlines Group Inc.||25%|
|Norwegian Cruise Line Holdings Ltd.||14%|
|Spirit Airlines, Inc.||14%|
|Copa Holdings, S.A.||13%|
|Lindblad Expeditions Holdings, Inc.||11%|
|Hyatt Hotels Corporation||10%|
|Expedia Group, Inc.||9%|
|Playa Hotels & Resorts N.V.||8%|
|Huazhu Group Limited||8%|
|Hawaiian Holdings, Inc.||7%|
|Red Lion Hotels Corporation||7%|
|Carnival Corporation & Plc||6%|
|Royal Caribbean Cruises Ltd.||5%|
|JetBlue Airways Corporation||5%|
|United Airlines Holdings, Inc.||4%|
|Hilton Worldwide Holdings Inc.||4%|
|Choice Hotels International, Inc.||3%|
|Allegiant Travel Company||3%|
|Trip.com Group Limited||3%|
|Southwest Airlines Co.||3%|
|Alaska Air Group, Inc.||3%|
|Marriott International, Inc.||3%|
|Booking Holdings Inc.||2%|
|Wyndham Hotels & Resorts, Inc.||2%|
|Delta Air Lines, Inc.||2%|
|Extended Stay America, Inc.||1%|
|Source: Capital IQ. Data as of 1/27/2021.|
This article was first published in the February 1 edition of Airline Weekly.
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Photo credit: What does Wall Street's shorting of airline and travel company shares tell us about investor sentiment? Mark Lennihan / Associated Press