It Didn't Take Long For Short Sellers To Pile Into Lyft

Lyft Inc (NASDAQ: LYFT) shares bounced back on Thursday morning but remain below the company’s $72 IPO price. After less than a week of trading, it's already clear Lyft will serve as a battleground for short sellers and long buyers.

Short Sellers Paying High Price

IHS Markit reported this week short sellers have already borrowed $455 million of Lyft shares to make bearish bets against the stock. Short sellers are reportedly not being deterred by the stock’s incredibly high 100 percent borrowing cost. At 27 basis points a day, Lyft is the most expensive stock to borrow among any company its size, according to IHS Markit.

IHS Markit analyst Sam Pierson says it’s common for investors to make large short bets on popular tech IPOs.

“Timing is the key, which is why short sellers are often willing to pay extraordinary borrow fees for IPOs,” Pierson said.

From 2000 to 2016, the average six-month return for U.S. IPOs was negative, according to UBS.

‘Into Overdrive’

Financial technology and analytics firm S3 Partners analyst Ihor Dusaniwsky said Wednesday short sellers have gone “into overdrive” with Lyft this week, short-selling 38.1 percent of the stock’s public float. At current levels, he said Lyft’s short interest far surpasses the short selling seen in recent IPO Levi Strauss & Co. (NYSE: LEVI) and 2017 IPO Snap Inc (NYSE: SNAP).

Levi Strauss’ IPO price was $17 and the stock is trading near $22. Snap’s IPO price was $17 and its currently trading at around $11.25.

“We can expect LYFT to be a significant short in the market for long time, especially with analysts already posting ‘sell’ recommendations less than a week after its IPO,” Dusaniwsky wrote in a report.

Lyft traded below its $72 IPO price on its second day of trading Monday and has yet to close a trading session back above that level.

At time of publication, shares were up 2.1 percent at $71.50.

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Photo courtesy of Lyft.