When it comes to the S&P/ASX 200 Index (ASX: XJO), it goes without saying that some shares are more beloved than others. Much is often made of the special attachment ASX investors have to the big four bank shares for example. Or else, long-time ASX stalwarts like BHP Group Ltd (ASX: BHP) or Woolworths Group Ltd (ASX: WOW). But we can't exactly say that about the Webjet Limited (ASX: WEB) share price.
Why? Well, Webjet shares have been frequenting the list of the most shorted ASX shares for a while now. My Fool colleague James takes a look at the most shorted ASX shares every week. And every week so far this November, Webjet has made the list of the 10 most shorted shares on the sharemarket. Throw in the last week of October, and we seem to have a company which investors are singling out as a lucrative short-selling target.
Why does this matter? Well, short selling is the practice of 'borrowing' another investors shares with the promise of returning them at a set date in the future. The shortseller then sells the shares upon receiving them, hoping to buy back those same shares at a later point for a cheaper price and return them to their owner. Thus, a successful 'short' relies upon a company's share price falling over the period the investor has chosen to short the share.
As such, a short is essentially a bet that a company's share price will fall. By extension, this means that investors appear to be not too bullish on Webjet's short-to-medium term prospects. That's given this company has topped the top 10 most shorted ASX shares for several weeks in a row now.
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Why are Webjet shares still topping the shortseller's Christmas list?
So why might investors be betting the Webjet share price has more downside in front of it than upside? Well, the company is scheduled to deliver its results for the first half of its FY2022 on 25 November, next Thursday. The travel industry is showing some green shoots and full-scale international flights are scheduled to resume in the next few months. Even so, the travel industry is still a long way from where it was in the pre-COVID world. And we also have the impacts of the most recent bout of lockdowns to consider, especially in Sydney and Melbourne.
Perhaps the short sellers are looking at the Webjet share price as well. Even though Webjet has taken a hit today, Webjet shares are still up an impressive 21.2% year to date in 2021 so far. They are also up 22.4% over the past 12 months. By contrast, the ASX 200 has only managed 11.6% and 15.05% respectively over the same periods. Perhaps shorts are betting that these gains have come too quickly.
Whatever the reason why so many investors are short selling this company, time will only tell if their bearish bets will pay off.
At the current Webjet share price of $6.21, this ASX travel company has a market capitalisation of $2.4 billion.
