Short sellers tend to be sophisticated, high-conviction traders. If they’re betting against a stock, it can pay to approach that security with caution.
In this report, we are going to highlight some bearish short selling activity at XL Fleet Corporation (XL:US). XL Fleet is a provider of vehicle electrification solutions for commercial fleets in North America. Its vision is to become the world leader in fleet electrification. The company listed on the New York Stock Exchange in 2020 via a SPAC deal and currently has a market capitalization of $1.1 billion.
XL Fleet: Short Selling Activity
Looking at the short selling data on XL Fleet, we see several red flags. The first is that short interest is very high at present. Our data shows that currently, 36.8 million XL shares are on loan. That represents about 38% of the company’s free float. We can see that since the beginning of April, short selling transactions have increased significantly.
A second red flag is that utilization is very high at 98.460%. Utilization is a measure of demand for stock on the short side of the market. A reading of 98.460% tells us that demand for the stock from short sellers is elevated. Overall, XL Fleet has a Borrowing Activity Rating of 9, which tells us that there is significant interest from short sellers here at present.
Muddy Waters’ Short Attack
Back in March, short selling firm Muddy Waters published a scathing report on XL Fleet entitled ‘XL Fleet Corp (NYSE XL): More SPAC Trash.’ In this report, Muddy Waters claimed that XL’s customer base is “grossly overstated” and that XL’s management “systematically inflates” the company’s backlog.
According to Muddy Waters, former XL Fleet salesmen say that they were pressured to inflate their sales pipelines materially in order to mislead XL’s board and investors. These former salesmen also said that XL misleads its customers about performance and savings.
Muddy Waters concluded by saying that it gives “very little credence” to the narrative that XL Fleet will be a serious player in full vehicle electrification. “We see little reality to the blue sky story with which this stock has been promoted”, the firm wrote in its report.
In light of this short report, we see the high level of short interest here as bearish. We think caution is warranted towards XL Fleet stock right now.
