Hasbro's (HAS) takeover bid for rival Mattel (MAT) has inflicted pain upon short sellers of both toymakers.

Since Hasbro made its bid for the maker of Barbie earlier this month, its stock is higher by 5%, while Mattel's is up 26%. As a result, short sellers were down $407 million in mark-to-market losses over the last week and a half, analytics firm S3 Analytics noted.

Mattel and Hasbro are two of the top five most shorted stocks in the Leisure Products Sector with $605 million of increased short exposure in both stocks combined since November 10th, the firm added.

While reports have indicated that Mattel has rejected the offer, some are arguing that Mattel is just balking in order to drive the offer price higher.

"The Mattel short trade may become a binary event, if it's true that Mattel believes Hasbro's initial takeover offer was insufficient there may be another bump-up in Mattel's stock price as Hasbro sweetens its offer and short losses will increase," S3 said.

Should the deal not come to fruition, short sellers will have the chance to recoup some of these recent losses.

Shares of Hasbro were falling over 1%, while shares of Mattel were also moving lower in afternoon trading on Monday. 

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