Short sellers up the ante on Qantas shares

The short interest in Qantas shares rose to its highest level since the pandemic this month.

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Qantas Airways Limited (ASX: QAN) shares are changing hands for $6.24, up 0.24% at the time of writing.

The share price of the ASX travel stock is up 16.45% in the year to date but down 2.3% over 12 months.

Following many dramas for the company over the past year, it seems some professional traders have lost faith in Qantas, with an increasing amount of short selling going on of late.

This means traders are placing bets that the Qantas share price will fall.

Let's look at what's happening.

More short sellers betting against Qantas shares

The beleaguered airline has been in the headlines for all the wrong reasons over the past year.

Scandals include illegally sacking 1,700 workers, advertising tickets for tens of thousands of flights it had already decided to cancel, and cancelling other flights without immediately informing ticketholders.

The Australian Financial Review (AFR) reports today that hedge funds are once again targeting Qantas shares and driving short selling back to multi-year highs.

The AFR reported that short bets peaked at 2.69% of Qantas shares on 6 May, which was the highest level since late 2020 when a once-in-a-century pandemic had essentially shut global travel down.

On 6 May, that short interest was worth $258.8 million based on the closing Qantas share price that day.

On the same day, Qantas announced it would pay a civil penalty of $100 million plus $20 million to more than 86,000 customers in a settlement with the Australian Competition and Consumer Commission (ACCC) over those cancelled flights.

That news appears to have sparked some trading, with some short sellers closing their positions.

By the next day, the short interest in Qantas shares had fallen from 2.69% to 2.58%, according to the daily short position report published by the Australian Securities and Investments Commission.

That's the equivalent of 1,813,143 shares no longer being shorted.

While 2.58% short interest is significant in historical terms for this ASX 200 blue-chip, it's not high when compared to the most shorted ASX stocks on the market at the moment.

Australian Eagle Trust, a long-short fund, told clients that it was still shorting Qantas shares but had reduced its short position in March.

In a recent quarterly update (courtesy AFR), the fund said:

Despite a clean-out of top executives and an aggressive public relations campaign, the company has been forced to decrease airfares due to increasing flights from competitors while cost inflation and fuel prices have put further pressure on margins.

Motley Fool contributor Bronwyn Allen 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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