BMO Capital cut SGML to Market Perform on Thursday, setting a $10 target against a stock already down 23% in September. Short interest rose 30% in a week to 3.3% of free float. The two signals are pointing in the same direction.
Joel Jackson at BMO Capital downgraded Sigma Lithium from Outperform to Market Perform this morning. The $10 target sits just above Wednesday's close of $9.40. That is a sharp change of view from a firm that maintained an Outperform rating through August 2024 with a $20 target, then $25 before that.
JP Morgan moved the other way two weeks ago. Lucas Ferreira initiated coverage on 18 September with an Overweight rating and a $14 target. The consensus now sits at Hold, with one Buy and one Hold on the board, and a mean target of $14.50, still 54% above current prices.
The gap between where analysts think the stock should trade and where it is trading is not doing much to attract buyers right now.
Estimated short interest reached 3.3% of free float as of 30 September, up 30% on the week and 23% on the month. At 3.3%, the absolute level is not extreme. But the rate of change matters. Positions have been added steadily since late September, with shares short climbing from roughly 2.86 million to 3.73 million in eight trading days.
The ORTEX short score sits at 44.7, up from 40.2 a week ago. The direction of travel is clear even if the absolute reading is moderate.
Here is where the picture gets complicated. Despite the increase in short positions, the borrow market has loosened sharply. Cost to borrow fell 58% in the past week to 0.36%, near historic lows. Availability stands at 567% of current short interest. There are roughly six shares available to borrow for every one currently borrowed.
That is not the profile of a stock under pressure from a crowded short. Plenty of capacity remains in the lending pool. Shorts can add positions cheaply and without constraint. The low cost to borrow removes one of the natural deterrents to further short-selling.
The put-to-call ratio stood at 0.68 on 30 September, against a 20-day mean of 0.53. The z-score of 1.89 reflects a shift toward protective positioning over the past week. That move coincides almost exactly with the period when short interest started climbing.
See the live data behind this article on ORTEX.
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