In this update on the short selling of Canadian public companies, we cover:
How to collect large interest payments from short sellers Top short positions for Canadian stocksLargest increases in short positions during the past 3 monthsThe Sell List from Veritas Investment ResearchStocks most at risk for short squeezesMethodology and data sources
How to collect large interest payments from short sellers
When short sellers borrow stocks to sell short, they usually need to pay interest — just like any other borrower. In the past, brokers kept all the interest income that short sellers paid on their customer’s shares, but in recent months many brokers have introduced stock-lending programs that now share the interest with their customers, typically on a 50/50 basis.
The rates paid by short sellers often don’t go above one per cent but when the demand to borrow a stock climbs relative to its supply, interest rates can rise to high levels — especially in the case of small caps. If an investor holds any of these stocks, it can be worthwhile to register them in the stock-lending programs.
Here is a list of the stocks that have lending rates above 10 per cent (as of the end of 2025). The loan rates vary daily and they usually trend down or up over time. Many of the companies will have thin floats and wide bid-ask spreads, which can make it more of a challenge to trade them. Also, the risk of an insolvency or delisting is higher for such small-cap companies.
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An interesting case from the list is clothing retailer Reitmans Canada Ltd. (RET-X). It emerged from creditor protection in 2022 but has since been profitable each year and currently trades at a price-to-sales ratio of 0.15 and at less than half of book value. Debt is relatively low. Since May, the average lending rate on its stock has been 16 per cent, half of which could be shareable with investors (the rate has recently edged down to 14.8 per cent). The shares are thinly traded and require patience to buy or sell.
Top short positions for Canadian stocks
Short selling occurs when shares in a company are borrowed and sold on the expectation they can be bought back at a lower price and returned to the owner. Here is a table of the 30 most shorted companies; several of them are also on the Sell List published by Veritas Investment Research (see section below).
McEwen Inc. (MUX-T) has moved to the top, rising from 16.2 per cent of float short in late November to 23.6 per cent. McEwen Inc. is a mining company mainly focused on precious-metals properties in Argentina, Mexico and the United States. This short selling may reflect an arbitrage trade on the shares of two companies about to merge: McEwen has launched an all-stock acquisition of Canadian Gold Corp. that is close to passing through all the legal and regulatory hoops.
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Activist short seller J. Capital Research released a report on Brookfield Business Corp. (BBUC-T) in late November. The author says: “BBUC has substantial debt commitments in addition to huge, off-balance sheet liabilities about which the company offers little detail.”
Largest increases in short positions during the past 3 months
An upward trend in a short position can signal intensifying bearish sentiment (it could occur for other reasons too — see the section below on Methodology and data sources). A jump in the short position for Propel Holdings Inc. (PRL-T) is leading the pack. Propel Holdings has built a digital platform for providing small loans to persons that traditional banks don’t usually service. Default risk is higher but so are the lending rates charged by Propel.
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The Sell List from Veritas Investment Research
Bearish sentiment can also be also found in the Sell recommendations of investment analysts. Those recommendations are scarce in the case of analysts at most brokerages but there are a few firms, focused only on investment research, where the Sell recommendations are relatively plentiful — such as Toronto-based Veritas Investment Research.
Veritas Investment Research publishes a list of their Sell Recommendations each month. It has a good track record, underperforming the S&P/TSX Composite Index by a compound annual growth rate of 5.3 percentage points from inception on March 25, 1999, to Oct. 31, 2025. Here is the Sell List that was published for December (some changes may have occurred since it was released).
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Most of the stocks are still trading well above the intrinsic values that Veritas has estimated for them, although Telus Corp. (T-T) has recently sold down and is nearly there. Many of the Sell recommendations are based on the company’s shares being overvalued because of market exuberance, not due to anything particularly negative about the company itself — an example being Shopify (SHOP-Q, SHOP-T). However, there are some estimates based on company-specific issues, such as poor disclosure in financial reports, aggressive accounting and off-balance-sheet debt.
Stocks most at risk for short squeezes
Whenever some event causes short sellers to close their positions in a rush, the result can be a spike in the stock price as they hurry to buy and return the stock that was borrowed. Data firm S3 Partners has created an algorithm, the Short Squeeze Score, to rank companies by the likelihood of a short squeeze, with 100 being the highest probability and 0 being the lowest.
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Methodology and data sources
S3 Partners was the main source for short-sales data. It was selected because Canada has many companies inter-listed on the U.S. and other exchanges, and S3 Partners sums short positions (currency-adjusted) across both countries. Other data sources for short sales data don’t do this.
A cutoff was applied to exclude companies whose short positions were miniscule in dollar value. The percentage of a company’s float (freely traded shares) is used instead of the percentage of outstanding shares to provide a better gauge of bearish sentiment.
As S3 Partners argues, the percentage-of-float-sold-short indicator significantly overestimates bearish sentiment for very heavily shorted stocks and should be corrected by adding to the float the synthetic long positions created by short sales (when a stock is shorted, it creates two owners of the same shares — the original owner and the owner of a synthetic long position). This adjusted version of the percentage-of-float-sold-short indicator will additionally be calculated for a stock with extreme levels of short selling.
Note that short positions, regardless of data source, may not be purely bearish bets because of trades made for hedging or arbitrage reasons.
Larry MacDonald is a regular contributor to the Globe & Mail and author of The Shopify Story.