When this was written — On 11 September 2026. The figures are as at that date or earlier and have not been updated since.
The rapid rise of the ASX's most shorted stock
DroneShield has taken the mantle of the most shorted stock on the ASX, with short interest climbing to 15.38% 1. This represents a 2.39 percentage point increase over its 90-day average of 12.99%, highlighting a deliberate and aggressive campaign by short sellers. The sector peer average short position sits at just 3.60% 1, making DroneShield a clear outlier in the defence and technology space.
The build-up in short positions has mirrored a steep decline in the company's valuation. Over the past three months, DroneShield's share price fell 37.8% to A$1.73, while the 12-month decline has reached 52.9%. The 30-day price-to-shorts correlation stands at -0.682, indicating a tight relationship between the rising short interest and the falling share price. Short sellers have capitalised on the downward momentum, pushing the short position close to its 90-day high of 16.13%.
This shorting activity has occurred despite earlier insider buying, such as a share purchase by director A Bean in late June 2026 2. However, that director confidence has been overwhelmed by institutional selling and short positioning, which accelerated as the stock broke through key support levels during its recent correction.
Interim losses and margin pressure fuel the bears
The catalyst for this bearish momentum lies in the friction between rapid top-line growth and deteriorating profitability. In its half-year results released on 26 August 2026, DroneShield reported a 74% surge in revenue R34. However, this record sales figure was overshadowed by slipping margins and a swing to an interim loss, which caused the share price to drop 7.9% in a single session 54.
This margin compression has raised questions about the scalability of the counter-drone platform under current cost structures 67. While the company reaffirmed its 2026 revenue guidance, analysts and short sellers alike have questioned whether the stock remains overvalued 89. Some market assessments suggested the company was overvalued by as much as 26% even after accounting for its forward sales pipeline 9. For short sellers, the ballooning interim loss provided the fundamental justification needed to press their shorts 5.
The divergence between volume and profitability has also triggered shifts in substantial holdings. Both late August and early September saw notices of changes in substantial holdings, indicating that larger institutional players are actively reshuffling their exposure as the growth narrative undergoes a transition 1011.
The friction between a 74% revenue surge and ballooning interim losses has given short sellers all the ammunition they need.
A high-profile CFO transition tests short conviction
The resolve of these short sellers is now facing its first major structural test. On 9 September 2026, DroneShield announced the appointment of a new Chief Financial Officer, pulling an experienced executive from Afterpay to lead its financial strategy 1213. The high-profile transition was paired with a trading update revealing that committed revenue has now crossed A$251 million 12.
This executive hire and the substantial revenue backlog are clear attempts to rebuild market confidence after a highly volatile August 14. The appointment of an ex-Afterpay executive suggests a focus on scaling financial operations and managing the margin pressures that have plagued the latest half-year report R34.
However, short sellers have yet to show signs of covering. The short position remains elevated at 15.38%, far above historical levels 1. With the stock down 20.6% over the past month alone, the market is currently weighing whether the new financial leadership can translate a massive order book into actual bottom-line profitability. If the A$251 million in committed revenue begins to convert to high-margin earnings, those holding the 15.38% short position may find themselves squeezed. For now, the shorts are holding their ground, betting that the path to profitability remains longer than the company's order book suggests.