Short bets against TD Bank surge 45% in two weeks to hit $6.1 billion amid investor skepticism toward its planned First Horizon takeover

• Short equity bets against Toronto-Dominion surged to $6.1 billion on Wednesday, up 45% from two weeks earlier.
• That comes as the Canada-based bank faces investor skepticism over its planned takeover of First Horizon Bank.

Investor pessimism toward Canada-based lender Toronto-Dominion (TD) just hit a new high.

Bearish stock bets against TD – the most shorted bank in the world – surged to $6.1 million on Wednesday, marking a 45% increase from two weeks earlier, according to ORTEX calculations, cited by Reuters.

It comes as traders question the bank's planned takeover of US regional bank First Horizon, according to the publication.

The lender first announced its $13.4 billion buyout of First Horizon in February 2022. But sentiment has turned against regional banks following the collapse of Silicon Valley Bank, and TD's shareholders are subsequently skeptical about the deal now.

TD is expected to address the deal at its annual general meeting Thursday, per Reuters.

"I think that short interest was elevated by arbitrage investors betting on the (First Horizon) deal ... suggesting that the market believes that the deal is at risk of closing," James Shanahan, an analyst at Edward Jones told the outlet.

Other headwinds buffeting TD include its exposure to Canada's weakening housing market, and its ties to troubled US lender Charles Schwab.

TD shares were down 0.55% to $61.79 apiece in after-hours trading on Wednesday. Meanwhile, First Horizon shares gained 3.01% to $19.15 in pre-market trading on Thursday.