TD becomes the world's most shorted bank

And Virgin Orbit crashes and burns...

April 07, 2023

TD is in the crosshairs of short-sellers 🎯

Toronto-Dominion Bank ($TD) has officially become the world’s most shorted bank with ~$3.7B in short interest, followed by France’s BNP Paribas with $3B, Bank of America with $2.7B and JP Morgan with $2.6B in shorts.

TD’s stock is down nearly 10% year-to-date, significantly underperforming the S&P 500, which is up ~7% in the same period

Bloomberg

TD’s struggles are partially due to macro challenges in the global banking sector amid the recent collapses of Silicon Valley Bank, Signature Bank, and Credit Suisse.

The whole sector is struggling, with financial indexes like Vanguard Financials Index down 7% YTD. Even so, TD faces specific concerns which put it in the crosshairs of short sellers:

  • 🏦 Acquisition Concerns: TD’s planned $13.4B takeover of US regional bank First Horizon, which many shareholders hope TD will ditch or renegotiate.

  • 🏠 Housing Market Woes: TD’s exposure to Canada's weakening housing market, where variable-rate mortgages are giving rising concern about insolvencies.

  • 📉 Ties to Charles Schwab: TD has a 10% stake in US lender Charles Schwab, which recently lost $47 billion in market value as it came under scrutiny over its unrealized bond losses.

While the headlines are certainly shocking, short interest as a percentage of TD’s shares (typically considered a more useful measure) remains relatively low at 3.3%, up from 2.8% a year ago. But even by that measure, TD is still third among the top 20 US and Canadian financial firms.

OPEC+ Shakes Up the Market 🛢️

OPEC+, the alliance of major oil-producing countries, announced an unexpected output cut, triggering concerns about higher oil prices and heightened inflation.

Following OPEC+'s announcement, oil prices experienced a significant spike qirh West Texas Intermediate crude (the U.S. benchmark) surging more than 6% to about ~$80 a barrel​.

Shutterstock

Some analysts warn that higher oil prices will stifle economic growth and could impact future central bank decisions on interest rates - giving more ammunition to justify further rate increases to combat inflation.

This comes hot on the heels of the NASDAQ 100 entering a bull market, as discussed in our last issue.

Virgin Orbit's Descent into Bankruptcy 🚀

Virgin Orbit, a prominent satellite launch company founded by billionaire entrepreneur Richard Branson, is on it’s last legs. To address its financial difficulties and restructure its operations, the company has filed for Chapter 11 bankruptcy protection.

Virgin Orbit’s stock ($VORB) has plummeted 89% YTD and 97% over the last year.

2023 has not been Virgin Orbit’s year, with the company encourtering a major setback during its "Start Me Up" mission, the first orbital launch attempt ever conducted in Europe. The unsuccessful mission severely damaged the company's reputation in the competitive space industry.

Compounding the situation, Virgin Orbit was unable to secure the funding needed to sustain and expand its operations.

After cutting about 85% of its staff, the company listed $243 million in assets and $153.5 million for its total debt in a Chapter 11 petition filed in Delaware.

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