SunRun Inc (RUN), a provider of residential solar energy installations, was a shorts-side candidate at CNBC’s “Delivering Alpha” Conference. Jim Chanos, founder of Kynikos Associates Ltd, and Carson Block, CEO/CIO of Muddy Waters Capital LLC, both expressed their short-side thesis for SunRun. While the Inflation Reduction Act and energy cost inflation have provided juice to the growing green energy market both Chanos and Block were suspicious of SunRun’s high valuation versus its revenue and debt situation, at one point characterizing SunRun as the “aluminum siding of the 21st century.”

RUN is one of the most shorted companies in the Electrical Equipment industry with short interest of $724.9 million, 23.33 million shares shorted, 11.39% SI % Float and 10.23% S3 SI % Float (which includes the synthetic longs created by every short sale in the trade float denominator) and a stock borrow fee of 0.30% (General Collateral).

Short Interest in Electrical Equipment Industry (as of 09.30.22)

Short interest in the Electrical Equipment industry has declined over the last thirty days, declining from $11.8 billion to $10.9 billion, which was due primarily to the decline in the mark-to-market prices of the share shorted. Over the last thirty days we saw a $1.4 billion decline in the mark-to-market value of shares shored offset partially by $533 million of new short selling. Short sellers were partially replenishing their short exposure as the stock prices of their shorts declined – backing up their bets on a hot craps table.

The stocks with the largest increase in shares shorted over the last thirty days, a sign that shorts continue to be bearish in these short positions, are below.

Electrical Equipment Stocks with Highest 30 Day Increase in Shares Shorted

While the stocks with the largest increase in short covering over the last thirty days, a sign that short side conviction is waning, are below.

Electrical Equipment Stocks with Highest 30 Day Change in Short Covering

RUN had the second largest amount of short covering in the Electric Equipment industry over the last thirty days, but this short covering has been a trend since March. Since February 28th RUN shorts have bought-to-cover 16.2 million shares, worth $503 million, a 41.0% decrease in total shares shorted as its stock price rose +13.9%. Run short sellers have been actively reducing their exposure in the stock for most of the year.

Shorting RUN has been a profitable trade in 2022 but it has underperformed the short-side returns of the Electrical Equipment industry.

RUN shorts are up $17.3 million in year-to-date mark-to-market profits, a +1.98% return on an average short interest of $872 million. Severely underperforming the Electrical Equipment industry average short-side return of +25.25%.

RUN short-side returns underperformed the industry average over the last thirty days as well, but not quite as badly. RUN shorts were up $56.6 million in thirty-day mark-to-market profits, a +6.49% return on an average short interest of $871 million – half the electrical Equipment industry average return of +13.45%.

While Chanos and Block are actively tweeting about and shorting RUN, we have seen short covering in the stock for most of the year. We will see if two high profile short sellers can sway the market and reverse RUN’s short covering trend. Recent price weakness in RUN may temper short covering but if RUN’s stock price reverses course and heads back towards $35/share we should see an acceleration of short covering that we saw historically at those price levels. It will be interesting to see of Chanos and Block and can short-side RUN momentum their way.