Short sellers taking aim at regional bank stocks are seeing windfall profits of $3.53 billion in March in the month to date and of more than $2.29 billion in the last three days of trading, according to data analytics company S3 Partners Research, which tracks short selling data. That’s at least on paper, based on their mark-to-market positions. It comes after the collapse of three banks in the last week — Silicon Valley Bank SIVB, Signature Bank SBNY and Silvergate Capital — which have sent the SPDR S&P Regional Banking Sector ETFKRE down 23% from March 8 through March 13. Both Silicon Valley Bank parent SVB Financial Group and Signature Bank are in the top 20 most shorted stocks in the regional banking sector. The most shorted stock is PNC Financial Services PNC. “We have seen increased short selling in the sector over the last seven days with $416 million of new short selling partially offsetting a $3.9 billion decline in the stock prices of shares shorted,” S3 wrote in commentary. For now, with SIVB and SBNY halted, shorts are left paying daily stock borrow financing rates and the short positions will remain open until the Nasdaq and DTC determine they are delisted and worthless, said S3, “providing for technical close outs of long and short positions or the short seller’s Prime Broker locates an OTC trade with a long shareholder. SIVB and SBNY short sellers are sitting massive mark-to-market profits but have no way to realize those profits at the moment.”
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