The short sellers took a short position on the CMBX, a little-known credit default swap index that tracks the values of bonds backed by mortgages of malls and other commercial real estate, such as offices and hotels. The short sellers make money when bond values fall as loan defaults occur. This year, it has continued to rise and is now close to levels when Alder Hill published its first report in early 2017 laying out his mall short, according to data from IHS Markit. That has made it difficult for short sellers to profit, especially since the bet requires them to make a regular 3% coupon cost as part of the short-sale process. Short sellers focused on the shares of listed mall owners have done much better than those focused on the debt.

Source: Wall Street Journal October 15, 2019 10:52 UTC