Did short sellers cash out or crash out in 2025?

On the 3rd day of Christmas, Livewire gave to me ...

A look at the stocks shorters love to bet against.

Everyone seems to hate short sellers, but the truth is they play a natural role in markets, supporting price discovery, liquidity, hedging and market efficiency.

When you look at the ASX’s most shorted names (or any market’s, really), they usually fall into two buckets:

• Thematic shorts
• Company-specific shorts

For the past ~12 months, short sellers have targeted several retail-favourite themes such as uranium, lithium and graphite. 

In most cases, I’d argue that these bearish bets aren’t personal but reflect investors' desire to hedge against the underlying commodity, rather than the company itself.

PLS CEO Dale Henderson put it well: "There appears to be a component of the market that wants to short lithium pricing and, given that there's no available mechanism to do that, they have gravitated, it would appear, to Pilbara as a proxy for the lithium market because of our scale, pure play exposure and our liquidity."

Then there are companies facing genuine headwinds that may or may not deserve to be shorted.

Below, we examine some of the market's most shorted stocks at the start of the year and at the end of FY25. Short interest levels can change over time, but for simplicity, we'll show the corresponding year-to-date and six-month share price performance.

Most Shorted: Start of Year vs. End of FY25

At the beginning of 2025, short sellers were piling into uranium and lithium stocks, and to a lesser extent, energy and graphite.

At the time, the commodity complex wasn't looking all that hot.

Uranium prices were in the midst of a sharp pullback from February 2024 highs around US$105/lb to lows of US$65/lb, and lithium was still trying to find a floor following the strong supply response in 2023-24. The consensus on higher-profile commodities like iron ore was also overwhelmingly bearish, with analysts widely expecting prices to drift from US$100 a tonne to US$90 a tonne by year end.

The broad weakness led the S&P/ASX 200 Materials index to post a 19.8% year-on-year decline in earnings, according to UBS.

Fast forward to today, and the commodity complex is looking as bullish as ever. For most of these resource-related shorts, they worked until they didn't.

Pilbara Minerals experienced a peak drawdown of almost 50% by June. But the stock is now up 85% year-to-date thanks to tailwinds, including positive Chinese lithium royalty reform and MinRes selling 30% of its lithium business at a 45% premium to consensus expectations.

The company-specific shorts made sense, with elevated bearish bets against Domino's (C-suite exodus, poor sales growth and margin challenges), IDP Education (weak student demand, regulatory headwinds across multiple jurisdictions) and Megaport (poor FY24 results, valuation concerns).

Domino's (even after its recent bounce) and IDP continued to trade lower year-to-date, while Megaport managed to turn things around following strong share price moves in its February and August reporting season results.

By the end of FY25 (30 June), the most shorted list remained relatively unchanged. Shorters were still betting against lithium and uranium, while a few new company-specific targets, including Polynovo (not sure why), Lifestyle Communities (ongoing VCAT dispute) and James Hardie (US construction sector headwinds, governance issues).

The uranium complex remains very mixed. On paper, it appears to be an asymmetric trade given the sector's emergence from a decade-long bear market and rising nuclear demand. After all, what else could power the stratospheric electricity demand of AI and data centres?

While the sector has traded mostly higher, it has also experienced abrupt, volatile drawdowns. Looking at specific miners, Boss Energy represents one of those freak accident moments. The stock experienced a 43% one-day selloff on 28 July after the company flagged "potential challenges that may arise in achieving nameplate capacity, largely due to the potential for less continuity of mineralisation and leachability." This led to a sharp upward revision in FY26 costs and capex, and a slight downgrade in production guidance.

Another way to look at it is that the sector remains relatively opaque and shorters may treat these stocks as a proxy for the underlying commodity.

Where are we now?

Short interest in the uranium sector remains stubbornly high, though the sector has seen little upside in recent weeks and months.

The soaring lithium sector has seen PLS short interest drop to 10-month lows, while peers like MinRes and Liontown have dropped to #39 and #122, respectively.

We're now left with a list of company-specific shorts, spread across various themes such as valuation, structural growth headwinds, corporate governance and more.

If 2025 were anything to go by, thematic shorts can unwind violently when commodities turn, as lithium bears discovered the hard way. Uranium could be next if the nuclear narrative gains more momentum. Company-specific shorts have proven rather logical and durable. These stocks aren't heavily shorted without reason, and the fundamentals backing those positions tend to play out more often than not.