Soaring 50% as short sellers stubbornly refuse to retreat! Is Pop Mart facing an epic "short squeeze" storm?

Despite a 50% surge in the stock price in less than a month, the short-selling forces targeting Pop Mart have not retreated; instead, they are building an extremely dangerous standoff. According to the latest data from S3 Partners, Pop Mart’s stock listed in Hong Kong has seen a significant rise recently, but this has not deterred short sellers, and so far, there has been no obvious short covering. On the contrary, based on S3 Partners’ squeeze risk rating system calculated by recent market value returns, Pop Mart’s squeeze risk score has reached the highest level of **100 points**. This typically means that if the stock price continues to rise, shorts will face immense pressure to close their positions, potentially triggering a chain-like surge in share price. However, the data reveals a counterintuitive phenomenon. S3 Partners research director Leon Gross points out: “Despite the high score, technically, a short squeeze has not occurred in this stock, since there has not been a significant net covering; in fact, from stock lending data, we see almost none.” This standoff is creating an extreme market structure. **Real-time data shows Pop Mart’s short positions continue to steadily rise, with shorts as a proportion of free-float shares sharply increasing from 2% to 16%.** Meanwhile, long positions and hedge fund holdings are also slightly increasing. Leon Gross comments: > **“Currently the scale of shorts far exceeds institutional long positions, which is very rare. It’s an extremely crowded one-sided bet that still shows no sign of retreat.”** This structure means that if long forces strengthen even slightly or the company releases positive news, these 16% short positions will have nowhere to go and may be forced to buy to cover in a stampede. On Wednesday, the stock fell by 5%, and earlier in the week it was at a technically overbought level, indicating that volatility is intensifying as longs and shorts battle fiercely. **Short Sellers’ Logic: Betting on Overseas Growth “Stalling”** Behind this long-short showdown is a huge split in the market over Pop Mart’s future growth trajectory. Although the company’s management is actively supporting the stock price through buybacks and other means, short sellers remain skeptical about the company’s performance in key overseas markets. Looking back to the end of January this year, this divergence between longs and shorts had already begun to emerge. After Pop Mart’s share price saw its strongest rebound in five months, short interest rose to its highest level since July 2023. Bernstein’s Asia consumer stocks analyst Melinda Hu pointed out incisively that **the main logic of short sellers is the cooling trend in key overseas markets.** Melinda Hu stated: “There’s still significant short-selling interest coming from the US market, because sales trends there continued to slow in January.” For short sellers, the price rise is not driven by fundamentals, but rather a good opportunity to short further. Melinda Hu argued: “Since this week’s rally is not driven by fundamentals, I suspect shorts may use the opportunity to increase their positions.” Even at the end of January, when Pop Mart’s management executed a HK$347 million (about $45 million) share buyback—the most aggressive attempt to prop up the stock in two years—it still failed to shake short sellers’ faith. Data showed the number of shorted shares surged from 44 million to 60 million in a week. CEO Wang Ning attempted to boost confidence in an interview with Xinhua, saying that the company’s intellectual property (IP) business normally goes through many cycles with ups and downs, but he believes the company’s IPs will continue to grow. **Intense Volatility About to Erupt?** However, this tug-of-war between “corporate defense” and “short aggressiveness” is escalating. On one side is management’s display of “ample financial resources” and commitment to share buybacks; on the other, shorts worry about waning demand for popular toy lines like Labubu. Now, S3 Partners’ “100-point” risk alert has lit up red. Will short sellers ultimately be forced out by margin pressure, triggering a spike, or will deteriorating fundamentals finally puncture the price bubble? The market stands at a critical tipping point. Risk Disclosure & Disclaimer The market bears risks, and investment must be cautious. This article does not constitute personal investment advice and has not considered the particular investment objectives, financial situation, or needs of any individual user. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their specific circumstances. Investment decisions made accordingly are at your own risk.