Leveraging open-source information about investor short positions can help recruiters identify companies where employees may be more receptive to new opportunities. This article explores the concept of short selling, its implications for talent acquisition, and how recruiters can use the tracking of short positions as a market mapping strategy to their advantage.
What Is a Short Position?
A stock short position occurs when an investor bets that the price of a stock will decline. Here’s how it works:
- Borrow Shares: The investor borrows shares of a stock from someone else, typically through a brokerage.
- Sell the Shares: The borrowed shares are sold immediately at the current market price.
- Wait for the Price to Drop: The investor hopes the stock price will decline.
- Buy Back the Shares: Once the price drops, the investor buys back the same number of shares at the lower price.
- Return the Shares: The borrowed shares are returned to the lender, and the investor keeps the difference as profit.
Example:
- An investor believes Stock X, currently priced at $1,000 per share, will drop.
- They borrow 100 shares and sell them for $100,000.
- The stock price falls to $800 per share.
- The investor buys back the shares for $80,000 and returns them to the lender.
- Profit: $20,000 (minus fees).
Investors take short positions when they believe a stock is overvalued or facing significant challenges, such as poor financial performance, competitive pressures, or market downturns. However, short selling is risky since losses can be unlimited if the stock price rises.
Why Do Short Positions Matter to a Recruiter?
Short positions can signal that investors or hedge funds believe a company is in trouble. Since shorting is high-risk and requires thorough research, a substantial short position is often significant news. For talent acquisition professionals, this information can:
- Highlight companies where employees might be experiencing uncertainty.
- Provide an opportunity to target talent from these organizations before widespread news impacts morale.
- Offer insights into industries or companies that are struggling, making their employees potentially more receptive to external opportunities.
Tracking Short Positions
Short positions can be tracked through various open-source platforms. A popular option is Yahoo Finance’s “Most Shorted Stocks” list. Using such tools, recruiters can identify companies with substantial short interest (see below). An additional site that can be leveraged to track short positions is MarketWatch (Most shorted stocks).
Example Companies with Large Short Positions:
- SMX (Security Matters):
- Stock down 99.26% in the last year.
- Received a NASDAQ listing deficiency notice.
- BYND (Beyond Meat):
- Stock down 44.72% in the last year.
- Shrinking unit sales and high burn rate.
- KSS (Kohl’s):
- Stock down 50% in the last year.
- Lagging sales and store closures.
- FFIE (Faraday Future):
- Stock down 92.39% in the last year.
- Facing production issues and high cash burn rate.
These examples show companies that may have valid reasons for their respective short positions, making them potential targets for sourcing talent.
What to Do After Identifying a Relevant Company with a short position
Once you identify a company with a large short position:
- Conduct Research: Use tools like the iPhone Stocks app or Robinhood to dive deeper into the company’s financials, stock trends, and news coverage.
- Evaluate Validity: Assess whether the short position is based on credible challenges such as declining revenue, poor leadership, or competitive pressures.
- Target Employees: Develop messaging tailored to employees’ potential concerns (e.g., job stability or growth opportunities) and reach out proactively.
Case Studies: Examples of Recent Short Sales
- MarketWatch: Symbotic (SYM)
- Stock is down 35% in the last year
- Active lawsuit for securities laws violations
- (+) This would be a strong target for recruiters.
- Hindenburg Research: SuperMicro (SMCI)
- Allegations of accounting failures led to a U.S. Department of Justice investigation.
- Stock dipped and remained down 8.3% following the announcement.
- (+)This would be a strong target for recruiters.
- Hindenburg Research: Roblox (RBLX)
- Alleged user inflation and reliance on bots.
- (-)Stock did not experience a significant dip, making it a less lucrative target for recruiters despite sentiment shifts.This stock has since recovered significantly from the short positions and increased in value.
I provide the above examples to show positive and negative results of using this approach to map markets. The stock market is fluid and continually changing, hence indicators like short positions must be researched carefully to make this a positive sourcing / market mapping method.
Monitoring short positions isn’t a guaranteed honeypot for strong candidate pools. However, it’s a valuable method for identifying companies facing challenges, creating an opportunity to target talent before large-scale press impacts morale and other recruiters begin to send messages. By staying proactive and market informed, recruiters can position themselves to attract top talent during times of organizational uncertainty.
