Short Sellers Ramp Up Their Bets Against Commercial Mortgage REITs
April 28, 2023 | Dees Stribling | Bisnow
Investors specializing in short selling, or betting against a stock, are flocking to mortgage REITs, in anticipation of further defaults of mortgages associated with office properties that will drive stock values down for those REITs.
Short interest in Blackstone Mortgage Trust is up from 5% of outstanding shares at the beginning of 2023 to about 14% recently, Bloomberg reports, citing S&P data. Likewise, short interest in Starwood Property Trust surged from 3.5% to 14% over the same period. Both of those entities have significant holdings of mortgages associated with office assets.
A short seller’s strategy is to sell borrowed stock, and then buy it back when its price has dropped, pocketing the difference. An increase in the amount of outstanding stock shorted by investors tends to indicate that more investors believe that a stock is on the way down.
