Weight-loss drugs like Novo Nordisk’s Wegovy and Ozempic are having an impact far beyond health care. Short sellers are now doubling down on restaurant stocks as rising interest rates and diet pills may affect consumer behavior.
Bloomberg reported, citing data from New York analytics firm S3 Partners, that short positions in companies such as McDonald’s, Chipotle Mexican Grill and Starbucks increased significantly in the 30 days as of Monday. Traders increased their bets by $815 million during the period, bringing total short interest in restaurants to $12.2 billion, the company said.
“If high interest rates persist, we should see discretionary consumer spending take a hit and the restaurant industry continue its downward price trend,” said Ihor Dusaniwsky, managing director of S3. tell Bloomberg. He added that the restaurant industry’s business could be harmed if more consumers resorted to GLP-1 drugs such as type 2 diabetes drug Ozempic and weight-loss drug Wegovy, both of which suppress appetite for food intake.
The possible knock-on effects of the GLP-1 drug are already starting to weigh on restaurant stocks. For example, the S&P 500 Restaurant Sub-Industry Index has fallen about 12% over the past three months. according to market observation.
S3 found that shorting restaurant industry stocks has paid off for investors — the firm said 97% of every dollar shorted over the past month was profitable.
“Right now, the momentum is in favor of the bears,” Dusanievsky told Bloomberg.
S3 Partners did not immediately return wealthRequest for comment.
Investors across industries are trying to gauge how the frenzy over Novo’s “miracle” weight-loss drug might affect different areas of business. Last week, UK bank Barclays recommended shorting fast-food credit as their products could suffer from the growing popularity of the weight-loss industry. The U.S. chief executive of Walmart, the world’s largest retailer, also warned that the company was seeing early signs that consumers using appetite-suppressing drugs were cutting back on some food spending.
Diet Pill Craze
Demand for the drugs Novo makes has turned the company, formerly known for its insulin manufacturing, into a pharmaceutical industry behemoth. Wegovy became a sensation among dieters, and social media and A-list celebrities like Musk helped amplify the buzz about the drug as a tool for safe weight loss.The popularity of these drugs soared almost simultaneously with rising food prices around the world, making Food sales ease As consumers tighten their wallets to combat inflation.
The fast-growing weight-loss market has helped Denmark’s Novo become Europe’s most valuable company, replacing luxury goods group LVMH.
“We are serving more patients than ever before,” Novo CEO Lars Fruergaard Jørgensen said in a statement announcing the company’s earnings for the first six months of 2023. in august. According to BMO Capital Markets, the weight-loss drug market will reach $100 billion by 2035, opening up a huge consumer base in the next few years.
Novo did not immediately return wealthRequest for comment.
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