The stock market tumble at the beginning of the coronavirus pandemic led to a rise in investors shorting the stocks of real estate companies, with some influential figures feeding the flames. Four months into the crisis, as the major stock market indexes have risen to nearly pre-pandemic levels, many investors are still betting against real estate stocks.
The share of investors betting against REITs, especially those in the retail and hotel sectors, spiked in February and March, stock trading data shows, but it has still remained elevated above normal levels into the summer.
“People realized, ‘My business trip is getting canceled,’ and that’s impacting airlines, travel and hotels, and there was an opportunity to make money on the short side because the hotel business was directly impacted by all these shutdowns that occurred,” Robert W. Baird & Co. Director of Equity Research Michael Bellisario said.
“The headlines started to snowball, and it was 10 to 15 days of hotel stocks falling off a cliff because people, as they always do, assume the worst is going to happen,” Bellisario added.
David Auerbach, an institutional trader with World Equity Group and a consultant with IRRealized, said investors also rushed to short retail stocks as they saw states shutting down businesses.
“It’s been a lot of the retail and lodging names that have been seeing the shorting activity,” Auerbach said. “Some of the retail names that have been under pressure prior to the COVID pandemic have been accelerated because of what’s going on.”
Hotel and retail stocks weren’t the only ones that made headlines that caused investors to short them. In mid-March, billionaire investor Carl Icahn told CNBC he is shorting the commercial bond market in his “biggest position by far.” Activist hedge fund manager Jonathan Litt in May said he was betting against New York’s office market by shorting Vornado, SL Green and Empire State Realty Trust.
“Jonathan Litt has a negative short thesis out on New York office, and he’s…