Short sellers are betting on toy maker Pop Mart — even though they’re losing money

Short sellers doubled down Pop Mart International as recent price gains make their bearish bets on Chinese toys look more risky.

Short interest in Pop Mart rose to 12.67% of shares outstanding as of Tuesday, up from 11.3% in April, according to S&P Global Market Intelligence data.

Pop Mart shares have more than halved from their highs in August last year to 153 Hong Kong dollars ($19.5), as of Tuesday. But the stock has recently recovered some ground, gaining 8% year-to-date from its April low — leaving the Chinese toymaker as the only 10-shortest Hong Kong-listed stock where short sellers are currently losing, according to a market intelligence firm.

“Pop Mart stands out as the only stock on the list where the shorts are losing money,” said Matt Chessum, senior director of equities and product analysis at S&P Global Market Intelligence, highlighting “strong” consumer demand and the growing risk of a technical short as the stock recovers from its April decline.

Persistent bearish bets indicate a deep rift between a large group of pessimistic traders and bulls. Bears have shown cooling signals in key overseas markets and doubt whether Pop Mart can sustain its growth, with concerns centered on declining demand for the Labubu toy line – while bulls oppose new product launches and what they see as attractive valuations.

Citigroup’s director of equity research, Lydia Ling, maintained a buy rating in June but cut her price target to $263 in Hong Kong, citing long-term growth focused on the strength of Pop Mart’s IP development and overseas expansion, while flagging near-term volatility overseas as a headwind.

Melinda Hu, consumer equities research analyst at Bernstein, maintained an underperform rating with a price target of 181 Hong Kong dollars. Management’s tacit acknowledgment of “smaller accumulation” of teams, fans, and retail infrastructure in overseas markets compared to China shows underlying weakness, Hu said in his note, published after Pop Mart’s first-quarter results.

“Management’s ‘pit stop year’ structure, emphasis on quality over quantity, and organizational restructuring are all slowing down the growth of brands,” Hu said. Pop Mart chairman and CEO Wang Ning used the pitfall analogy in the company’s 2025 annual report, describing the previous period of “F1-style” expansion as rapid acceleration and 2026 as a year of “pausing on the pit lane to refuel and change tires” as the company consolidates continued profitability and pursues continued growth.

The risks are heightened for short sellers, with Pop Mart shares currently 92.4% used – meaning almost all of the shares available for lending are already borrowed – making it difficult and expensive for new bearish bets to enter positions, according to S&P Global.

“The issuance of new shorts will be a big challenge,” while funds remain high, Chessum said, adding that the profitability of shorts will be determined by the cost of borrowing.

– CNBC’s Justina Lee contributed to this report.