Flight Centre (ASX:FLT) shares have a 13% short interest. What does this mean?

Here’s what long-term investors need to know about Flight Centre’s short position.

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Short interest in Flight Centre Travel Group Ltd (ASX: FLT) shares is at a near all-time high. But what does that mean for the company’s investors?

At the time of writing, the Flight Centre share price is $17.29, 0.23% lower than its previous close.

For context, the S&P/ASX 200 Index (ASX: XJO) is currently up 0.14%.

What does Flight Centre shares’ short interest matter?

According to the most recent data, Flight Centre is still the most shorted share on the ASX.

As of 30 November, 13.49% of the company’s shares are in the hands of short-sellers. That’s compared to the 4.58% that were shorted as of 29 November 2019.

So, what does Flight Centre’s short interest mean for the company’s future? Well, it means some investors expect the stock to tumble in the near-to-medium term.

To simplify short-selling, it’s when someone – dubbed a ‘short-seller’ – borrows shares before immediately selling them.

They then hope the company’s share price goes down so they can buy back the borrowed shares at a lower price and return them to the lender.

If successful, a short-seller will return the shares and take the amount the share price fell as profit.

The percentage of short-seller interest represents how much of a company’s stock is currently being used by short-sellers to do just that.

Thus, the level of short-selling activity in Flight Centre shares means confidence in the company’s share price is low in some circles. This might be a bad sign for long-term investors.

One fundie broke down why they think Flight Centre is a good short pick at Friday’s Sohn Hearts & Minds Conference.

One reason cited was the issuance of $800 million worth of notes as part of an emergency capital raise as COVID-19 rampaged the company.

Another was Flight Centre’s general business model, which the fundie stated might struggle to turn a profit in the future.

If the fundie’s concerns prove valid, it could be dire for the Flight Centre share price.

However, if the travel agency’s share price turns upwards, it will spell bad news for short-sellers, who will be forced to pay back the amount the share price gains.

Should you invest $1,000 in Flight Centre right now?

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Motley Fool contributor Brooke Cooper 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 Bruce Jackson.

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