The market to borrow another closely watched technology IPO has been much
tighter. Chinese social network Renren Inc. (RENN) has more than two-thirds of
lendable supply out on loan, figures from securities-financing tracker Data
Explorers showed.
---
UPDATE: LinkedIn One Of Most Costly Stocks To Short - Astec
Last Update: 5/25/2011 5:27:42 PM
(Adds further LinkedIn shorting details in the second paragraph, closing stock
price in the fourth paragraph, and Renren comparison in the ninth paragraph.)
By Brendan Conway
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--LinkedIn Corp.'s (LNKD) stock is immediately one of the
U.S. market's most talked-about "shorts"--and one of the most costly.
Brokers borrowed 1.17 million shares in the newly listed Internet stock Tuesday,
or about 15% of the entire float, data from SunGard Data Systems Inc.'s Astec
Analytics unit show. Although the float represents only about 9.5% of total
shares in the company, the figure shows a healthy appetite for LinkedIn
negativity.
"If short interest as a percent of float is in the double digits, many investors
consider that to be significant," said Andrew Shinn, director of research for
Astec Analytics. "For LinkedIn, it's immediately a stock with a lot of short
interest."
The data are the market's first glimpse into investors' desire to go bearish on
LinkedIn's stock, which posted a first-day price surge of 109%. Analysts had
predicted a substantial effort to short the stock, given the vigorous debate over
LinkedIn's valuation and the memories of the heady Internet bubble of the late
1990s, evoked by LinkedIn's initial public offering last week. Shares closed 1.2%
lower at $94.33 in trading Wednesday.
Investors who want to short shares borrow the stock and then sell it, betting
that the price of the shares will fall and that they can buy them back at a lower
price, for return to the lender. In order to borrow the shares, investors have to
pay the owner a fee, normally an annualized percentage of the stock's value.
The small float of LinkedIn's stock had many market analysts predicting it would
be difficult--and--costly to sell the stock short. The princely lending rates
this week bear that prediction out.
The average wholesale rate to borrow LinkedIn shares was 86% Tuesday, Astec's
data show. This means that hedge funds seeking to sell the stock short may have
had to pay as much as 181% on an annualized basis to borrow shares, according to
the company's estimates. LinkedIn is the fourth-most expensive stock in the U.S.
to borrow at present, the same data show.
Unlike similarly priced shorts, there are still more LinkedIn shares to go
around. LinkedIn borrowers have tapped only about 22% of available shares,
Astec's data show. Very high rates usually correspond with a scarcity of stock to
borrow, with utilization rates like 90% to 100%. The high cost versus a
relatively ample supply was read as a sign that shareholders were capitalizing on
the publicity and strong interest in bearish LinkedIn positions.
"It seems like the securities lenders were saying, 'Let's charge the maximum
amount we can for this, since it's in the news and it's such a popular short',"
Shinn said.
LinkedIn is the only well-known name among the costliest U.S. shorts. The three
pricier, as of Tuesday morning, were over-the-counter shares in Kunekt Corp.
(KNKT), as well as China Shen Zhou Mining & Resources Inc. (SHZ) and Dearborn
Bancorp Inc. (DEAR), according to Astec's data. |
