South Bow Corporation heads into the post-earnings week with short sellers having made their most aggressive move in months — just as the company delivered a quarterly result that gave them reason to stay.
Short interest jumped 28% in a single week, lifting the SI % of Free Float from 4.7% to 6.0%. That brings the one-month increase to 51% — meaning shorts have added roughly half again as many borrowed shares in 30 days as they held at the start of April. The timing is precise: the step-up in short positions arrived immediately ahead of the May 7 Q1 2026 print, in which South Bow reported EPS of $0.44 — a slim miss against the $0.45 consensus — while revenue of $491M beat the $482.8M estimate. Net income fell to $77M from $88M a year earlier, and diluted EPS dropped to $0.37 from $0.42, reflecting a year of tighter margins on the pipeline. The stock barely flinched on the news, finishing May 8 down just 0.9% to CAD 47.50 — but the short positioning was already in place before the result landed.
The borrow market tells a more relaxed story than the surge in shares short would suggest. Availability is ample — lending pool tightness, measured by how much of the available borrow has been drawn down, remains well off its 52-week peak. The cost to borrow has collapsed from a spike near 37% (annualised) at end-March to just 0.46% as of May 7, a drop of more than 60% on the week and over 55% on the month. That earlier CTB spike now looks like a temporary dislocation rather than structural demand — and current rates close to zero suggest shorts are entering cheaply. With days to cover running at roughly 9.8 days on official settlement data, any reversal of the short build would take time to unwind.
Analyst opinion adds a further layer of tension. Goldman Sachs initiated in late April with a Sell rating and a CAD 29 price target — a target now more than 38% below the current CAD 47.50 price. Scotiabank, meanwhile, maintained Sector Perform on May 8 but raised its target to CAD 36, still a meaningful 24% discount to where the stock trades. The Street's message is that South Bow is priced for more than its fundamentals justify — with a forward P/E near 19.3x, EV/EBITDA at 11.9x, and an earnings yield of roughly 5.2%, the valuation is not obviously stretched for an infrastructure name but leaves little room for execution stumbles. The dividend yield implied by current prices is close to 5.7%, which may be what keeps the stock supported even as bearish analyst coverage builds.
Institutional ownership is broad but not unanimous in its direction. Capital Research holds 7.6% of shares, with FMR and Vanguard each adding modestly in recent filings. RBC Dominion trimmed aggressively — shedding over 6 million shares through year-end 2025 — while Royal Bank of Canada also reduced its position. On the insider side, the net picture over the past 90 days was technically positive (net buyer in share terms), but the detail matters: the CEO and COO each sold several million dollars' worth of stock at prices around CAD 45–46 in early March, with a subsequent small buy from a director at CAD 34 in late March. The award-and-sell pattern at C-suite level is consistent with compensation vesting rather than conviction.
The ORTEX short score nudged above 50 this week for the first time since tracking began on this name, rising from 46.4 to 50.5. That puts it in neutral territory, but the direction of travel is up. The next confirmed earnings date is August 6, 2026 — the Q2 print — giving shorts a three-month window to see whether the margin compression evident in Q1 extends further. What to watch in the near term is whether the elevated SI % FF (now at a multi-month high) stabilises or continues to build, and whether the current near-zero cost to borrow begins to rise as new short demand meets a finite lending pool.
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