10 Most Successful Short Sellers of All Time

Published on June 7, 2021 at 10:19 am by Fatima Farooq in Lists, News

In this article we will take a look at the 10 most successful short sellers of all time.

Short selling has been getting a lot of attention amid the GameStop Corp. (NYSE: GME) saga that unfolded earlier this year and still continues to haunt various hedge funds, especially those who make money shorting stocks. Short selling has always been a risky investment strategy. According to a report by S3 Partners, shorts were down a whopping $245 billion in 2020. The firm’s data shows that up till 2019, ten of the most shorted US companies had cost short sellers around $7.5 billion in market-to-market losses. Internet platforms and forums like Reddit and Robinhood have provided retail and general investors a way to unite and initiate “short squeeze” against institutional investors and major names who short companies. That’s why when certain hedge funds started shorting AMC Entertainment Holdings Inc (NYSE: AMC) and GameStop Corp. (NYSE: GME), thousands of investors on Reddit started buying these stocks, resulting in millions of dollars in losses for funds like Gabriel Plotkin’s Melvin Capital.

But that doesn’t mean shorting is always a bad strategy. Smart short sellers don’t bet against companies randomly. They analyze securities, market trends and data. That’s why in this article we will take a look at some of the most successful short sellers in the market’s history.

Some stocks you might be familiar with are some of the most shorted worldwide, showing how risky yet popular the process is. Up till 2019, Tesla, Inc. (NASDAQ: TSLA), AT&T Inc. (NYSE: T), Apple Inc. (NASDAQ: AAPL), and Amazon.com, Inc. (NASDAQ: AMZN) were some of the most shorted stocks worldwide. This year, according to the Statista Research Department, PubMatic, Inc. (NASDAQ: PUBM) stands at the top of the most shorted stocks with a 50.82% share of float shorted. PubMatic, Inc. (NASDAQ: PUBM) is followed by Ontrak, Inc. (NASDAQ: OTRK) with a 45.56% share of float shorted, Blink Charging Co. (NASDAQ: BLNK) with a 37.82% share of float shorted, and Nikola Corporation (NASDAQ: NKLA) with a 36.81% share of float shorted.

If you’re surprised at the fact that apart from shorting companies like Nikola Corporation (NASDAQ: NKLA), there are people out there shorting Apple Inc. (NASDAQ: AAPL), the largest company in the world, we don’t blame you. Skeptics of the renowned iPhone-making company Apple Inc. (NASDAQ: AAPL) have faced numerous losses, as shares in the company continue rising with higher sales and revenue forecasts. But at the same time, short selling a renowned stock isn’t always a bad idea, since shorting AT&T Inc. (NYSE: T) has resulted in gains for short sellers in the past, notably in 2017 when the year-to-date profit/loss for short sellers of AT&T Inc. (NYSE: T) stood at a $380 million gain.

The above goes to show that in the end, short selling is and always will be a massive gamble for the seller. Yet, it is a practice that is ingrained in the investors of today. Hence companies like PubMatic, Inc. (NASDAQ: PUBM), Nikola Corporation (NASDAQ: NKLA), and even Tesla, Inc. (NASDAQ: TSLA) continue to be shorted. Like with Apple Inc. (NASDAQ: AAPL), short sellers in the past have not had much luck with Tesla, Inc. (NASDAQ: TSLA), one of the most shorted and polarizing US stocks. In the past few years alone, the year-to-date profit/loss for short sellers targeting Tesla, Inc. (NASDAQ: TSLA) stood at a $2.11 billion loss.

However, famous investor Michael Burry recently stunned the market by announcing a $530 million short position against Tesla, Inc. (NASDAQ: TSLA). As we will see in this article, Burry has been right about a lot of things in the past. And unlike short sellers of AMC Entertainment Holdings Inc (NYSE: AMC) and GameStop Corp. (NYSE: GME), Reddit communities have a lot of respect for Burry. But only time will tell how prescient Burry’s prediction was about Tesla, which is up 215% over the last 12 months.

With this context in mind, let’s start our list of the 10 most successful short sellers of all time.

Jim Chanos puppeteer

Most Successful Short Sellers of All Time

10. Jacob Little

Ranked 10^th on the list of the most successful short sellers of all time is an early 19^th century Wall Street investor and the first speculator in the stock market’s history. At the time, he was known as the “Great Bear of Wall Street.” Born in Newburyport, Massachusetts, and having moved to New York City in 1817, Little opened his brokerage in 1834. Being a market pessimist himself, he made his fortune “bearing stocks,” short selling several companies and cornering markets to extract profits from other short sellers. His significant financial foresight helped him amass an enormous fortune, with his first great bet being in 1834 when he successfully bought out the Morris Canal and Banking Company. Little pushed its stock price from $10 ($259 today) per share in December of the same year to $185 ($4,796 today) by January 1835. At this point, choosing to collect his debts, Little made his first fortune. Throughout his life, he continued short selling to amass wealth and lost and regained his fortune multiple times before losing it for good in 1857.

9. Jim Chanos

American investment manager Jim Chanos is the president and founder of Kynikos Associates, a New York City registered investment advisor focused on short selling. He is ranked 9^th on the list of the most successful short sellers of all time. One of his most famous bets is the one on the Enron collapse. Chanos was a short seller of Enron throughout 2001. He profited from the trace while gaining a reputation as a short seller after his prediction of the fall of Enron Corporation just before it filed for bankruptcy in 2001.

8. Charlie Ledley

Portrayed in the famous movie “The Big Short” as Charlie Geller, Charlie Ledley stands 8^th on the list of the most successful short sellers of all time. Ledley, alongside Jamie Mai below, founded Cornwall Capital, a New York City investment corporation. Starting small by Wall Street standards, Ledley’s unique shorting strategy brought him insurmountable profits. While conventional short sellers bet against the lowest tranches of the CDOs (collateralized debt obligation), Ledley and Mai bought credit default swaps that allowed them to bet against the highest tranches, after realizing that triple-A bonds were as vulnerable to collapse as triple-B bonds, but the swaps against them were priced differently. Ledley ensured that Cornwall’s $1 million swaps sold for $80 million by the time business ended for the day through this short selling strategy, and also profited from investments in Capital One Financial Corporation (NYSE: COF).

7. Jamie Mai

Jamie Mai, Ledley’s partner in the establishment of Cornwall Capital and their investments in Capital One Financial Corporation (NYSE: COF), the credit card company, and United Pan European Cable, to name two, ranks 7^th on the list of the most successful short sellers of all time. Mai and Ledley started with an initial $110,000 investment in Cornwall Capital, and through their unique approach to short selling, they were able to turn this amount into nearly $130 million. Mai and Ledley bought wrongly priced option contracts instead of buying the Capital One Financial Corporation (NYSE: COF) stock for a 75% return based on their different approach and earned a whopping 2000% return on this investment. With United Pan European Cable, they bought $500,000 long-term call options, and when rallied, their investment brought in $5.5 million.

Short sellers like Mai were able to defy the market and make a lot of money unlike the modern short sellers who struggle against retail investors when they short stocks like AMC Entertainment Holdings Inc (NYSE: AMC), GameStop Corp. (NYSE: GME), Tesla, Inc. (NASDAQ: TSLA), Nikola Corporation (NASDAQ: NKLA), Apple Inc. (NASDAQ: AAPL), Amazon.com, Inc. (NASDAQ: AMZN), PubMatic, Inc. (NASDAQ: PUBM), Ontrak, Inc. (NASDAQ: OTRK) and Blink Charging Co. (NASDAQ: BLNK).

6. Michael Burry

American investor, hedge fund manager, and physician Michael James Burry is the hedge fund Scion Capital‘s founder. Burry profited from the subprime mortgage crisis in the US, which occurred between 2007-2010, but he was the first investor to foresee and earn from it. Concluding through research that the subprime market would collapse as early as 2007, Burry shorted the market after persuading Goldman Sachs Group, Inc. (NYSE: GS) and other investment firms to sell him credit default swaps against subprime deals he thought to be vulnerable. He was proved to be correct and personally profited by $100 million, with over $700 million in profit for his remaining investors, earning him the 6th rank on the list of the most successful short sellers of all time.

most successful short sellers of all time

Michael Burry of Scion Asset Management

Burry recently shorted Tesla, Inc. (NASDAQ: TSLA). Tesla is one of the most shorted stocks like Apple Inc. (NASDAQ: AAPL), Amazon.com, Inc. (NASDAQ: AMZN), AMC Entertainment Holdings Inc (NYSE: AMC), GameStop Corp. (NYSE: GME), Nikola Corporation (NASDAQ: NKLA), PubMatic, Inc. (NASDAQ: PUBM), Ontrak, Inc. (NASDAQ: OTRK) and Blink Charging Co. (NASDAQ: BLNK)

5. Steve Eisman

American businessman and investor Steve Eisman ranks 5^th on the list of the most successful short sellers of all time. During the collapse of the US housing bubble in 2007 – 2008, Eisman profited by shorting collateralized debt obligations (CDOs). He became renowned for his bet against CDOs at Greenwich, Connecticut-based FrontPoint Partners LLC, a unit of Morgan Stanley. By 2010, Eisman managed over $1 billion for FrontPoint.

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4. John Paulson

John Paulson ranks 4^th on the list of the most successful short sellers of all time. Paulson is an American hedge fund manager who became a billionaire through his financial foresight. He leads a New York-based investment management firm founded in 1994, Paulson & Co., and is known to be someone who made an enormous fortune in Wall Street history. In 2007, Paulson earned around $4 billion after shorting the US housing market. He foresaw the subprime mortgage crisis and used credit default swaps to bet against mortgage-backed securities. Three years later, he earned another $4.9 billion by investing in the gold sector.

John Paulson of Paulson & Co

3. Fahmi Quadir

Founder of the New York-based Safkhet Capital, a short only fund, Fahmi Quadir, is renowned for her short sales. One of the most famous bets was placed by Quadir, third on the list of the most successful short sellers of all time, was when she shorted Valeant Pharmaceuticals International, Inc. (NYSE: VRX), whose stock fell dramatically in 2015 from $260 to the low value of $8. After realizing that Valeant Pharmaceuticals International, Inc. (NYSE: VRX) was involved in unethical and potentially fraudulent practices, Quadir executed her short in June 2015, just as the stock was nearing its peak. Her bet paid off as the stock fell from $257 to $28 between July 2015 and March 2016. As the stock lost 90% of its value, it became the most significant profit earner for Krensavage, the firm Quadir was affiliated with at the time, which earned a 14% return in 2016 through this short, which has helped Valeant Pharmaceuticals International, Inc. (NYSE: VRX) short sellers to make $2.8 billion in profit since the stock’s peak in 2015.

2. David Einhorn

Second on the list of the most successful short sellers of all time is David Einhorn, an American investor, and hedge fund manager. Einhorn founded Greenlight Capital, a long-short-value-oriented hedge fund, in 1996. One of his most famous bets is from July 2007, when he shorted the Lehman Brothers Holdings Inc. stock under the belief that they have massive exposures to illiquid real estate investments that were not accounted for properly. His highly publicized statement to short Lehman Brothers Holdings Inc. revealed that they were also using dubious accounting practices in their financial filings. His word ended up being incredibly accurate, as the Lehman Brothers Holdings Inc. stock fell sharply, ending first in a $2.8 billion quarterly loss and eventual bankruptcy in 2008. Einhorn himself has become a highly influential investor, with a net worth of $700 million and a fund with around $5.5 billion worth of assets under management in 2018.

David Einhorn of Greenlight Capital

1. George Soros

Perhaps the most famous and successful of all the short sellers in the world is George Soros, the man responsible for “breaking” the bank of England, earning him the first rank on the list of the most successful short sellers of all time. When Britain upped its interest rates to attract more people to the pound, speculators like Soros began heavily shorting the currency. When the government realized that it was losing billions of pounds because it attempted to buoy its currency to higher levels artificially, it gave in. It withdrew from the Exchange Rate Mechanism (ERM). Due to this, the pound came back more vital than ever, and the British economy was able to strengthen once inflation levels were controlled and high interest rates were reduced. For the role Soros played in enforcing market dynamics, he was able to earn $1 billion on the deal while cementing his reputation as the premier speculator of currency.