Background: Guzman y Gomez was founded in Australia 20 years ago and became one of the most hyped IPOs on the ASX in 2024. The pitch was continued Australian growth plus expansion into the much larger US Mexican food market.

What happened: While GyG’s network sales rose 18% to more than $681 million, its US business posted an $8 million first-half loss. But in more concerning news, the GyG management team has capped expansion at 15 stores until the US model proves itself.

What else: The US was meant to be GyG's next growth engine. Instead, it has become the key risk. As a result, GyG's shares now trade below the IPO price and more than halved from their peak. With concern about its performance, it has the short sellers circling.

What's the key learning?

💡Short selling is effectively when investors bet that a company’s share price will fall. Investors borrow shares, sell them at today’s price and aim to buy them back later at a lower price, pocketing the difference.

💡High short interest often signals scepticism. GyG is the fourth most shorted company on the ASX, with around 13.6% of its shares shorted. That means a meaningful portion of the market is betting the valuation is too high and future earnings may disappoint.

💡So far, doubts about the US expansion have proved justified...so GyG now needs to show it can turn losses into a scalable, profitable model and revive confidence in its global growth story.