Latest / The Bear Market Podcast with Fexingo: Surviving Downturns, Buying the Dip, and Long-Term Resilience / Short Sellers Target New Listings Like SK Hynix
Transcript
- Lucas: So SK Hynix listed on the Nasdaq earlier this month, and within days, short sellers were already piling in. According to CNBC, the stock has been a prime target for bears right out of the gate. Luna: That's quick. Usually new listings get a grace period, but it seems like the shorts aren't waiting around. Lucas: Exactly. And it's not just SK Hynix — we're seeing a pattern where short sellers are aggressively targeting new IPOs, especially in the semiconductor and AI space. If today's episode helps you think about how to approach new listings or the broader market, that's the goal. The only reason this show stays ad-free is listener support. If you find value, you can help keep it going at buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small way to support what we do, and we appreciate it. Lucas: So back to SK Hynix. The stock debuted around mid-July, and by the end of the first week, short interest was already noticeable. That tells you something about how hedge funds view the semiconductor cycle right now. Luna: Is it just skepticism about memory chips, or is it broader than that? Lucas: I think it's broader. Look at the market backdrop: the S&P 500 is at 7,372, down half a percent over the last five days. The Nasdaq is off nearly two percent. The Dow, on the other hand, is up half a percent. That kind of divergence usually signals a rotation out of growth and into value or defensive names. Luna: Right, and small caps are getting hit too — the Russell 2000 is down over one percent in the same period. Lucas: That's a key point. If small caps are struggling alongside tech, it's not just a growth rotation. It suggests a broader risk-off mood, even though the Dow is holding up. The VIX is at 20 — elevated but not crisis level — and the VVIX is at 105, which means options on volatility are pricing in a higher chance of spikes. Luna: So short sellers see the VIX at 20 and think, 'there's room for more fear'? Lucas: Exactly. And they're placing bets on individual names like SK Hynix that are unproven. The company is a major memory chip supplier, but the AI trade has gotten crowded. Steve Eisman was on record a few weeks ago saying he's selling AI stocks — and now we see short sellers targeting an ai adjacent IPO. Luna: It's like a double confirmation. But isn't the economy actually improving? GDP just came in at 2.1% annualized, up from 0.5%. Lucas: It is, and that's the interesting tension. The macro data is getting better — the ten-year yield has actually dipped to 4.65%, which might reflect expectations that the Fed is done hiking. But the market is not cheering. Instead, it's selectively punishing certain sectors. New listings in the chip space are an easy target because valuations are high and the narrative around AI capex has some holes. Luna: Are there other recent IPOs getting shorted? Lucas: We don't have a full list, but the pattern is consistent. Anytime you get a hot IPO in a frothy sector, shorts come in quickly to test the valuation. What's different this time is the overall market environment — you have the Dow making highs, the Nasdaq pulling back, and the VIX at 20. That's not a crash setup, but it's a selective bearishness. Luna: So what should a listener do if they're considering buying the dip on a new listing like SK Hynix? Lucas: First, recognize that short interest can be a double-edged sword. If the shorts are wrong, the stock can squeeze higher. But given the sector headwinds — falling semiconductor stocks, AI exhaustion — it's a high-risk bet. I'd watch the VIX and VVIX closely. If VVIX stays above 100, expect more volatility. And look at the broader market direction: if the Nasdaq continues to lag, new tech IPOs will face headwinds. Luna: So patience might be the better play right now. Lucas: That's what I'd recommend. The GDP rebound is encouraging, but the market is sending mixed signals. Short sellers are aggressive on the margins. Until we see a clear catalyst — either a Fed pivot or earnings that blow expectations away — I'd be cautious about chasing new names. Luna: And if the shorts are right, we could see more downside in the AI and semiconductor space. Lucas: Exactly. And that would weigh on the Nasdaq even further. The Dow's resilience might not last if tech takes a big hit. So keep an eye on those VIX and VVIX levels — they're telling us the market is nervous, even as the economy improves. Luna: Good to know. Thanks, Lucas.