In the span of just three days, short sellers minted more than US$2 billion in paper profits as the collapse of Silicon Valley Bank set off a cascade of selling across the stocks of regional lenders.
The precise amount of the mark-to-market gains came to US$2.29 billion from Thursday to Monday, according to data compiled by S3 Partners. It was a frenetic stretch that saw the SPDR S&P Regional Banking ETF — which includes SVB Financial Group — plunge the most since 2020.
The declines over those three days, however, “produced windfall profits for short sellers,” S3’s Ihor Dusaniwsky and Matthew Unterman wrote in a Tuesday report. About 98% of each dollar short in the sector over that span was profitable, they said. Unfortunately for those short-sellers, the shares have been halted, meaning the traders are sitting on “massive mark-to-market profits but have no way to realize those profits at the moment,” the analysts said.
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