Traders are waging a nearly $1 billion bet against Lyft and still have lots of 'dry powder' (LYFT)


Lyft Ride Car Customer

  • Lyft short-sellers have plenty of “dry powder” to increase positions, according to research note.
  • The ride-sharing company has attracted short interest of nearly $1 billion in its rocky market debut.
  • Shares were down more than 17% from where they debuted last Friday.
  • Watch Lyft trade live.

Traders have amassed a nearly $1 billion bet against Lyft and still have plenty “dry powder,” according to a note out Thursday.

The ride-sharing company has had a rocky market debut since its initial public offering on March 28, with shares sinking more than 17% from their debut trade of $87.24. Short interest in the name has leapt to $937 million as 13 million shares, or about 41% of those traded, were shorted according to Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, a financial-analytics firm.

The stock has become the target of short-sellers for its $23 billion valuation despite recording losses of over $900 million last year. The selling has pushed shares down to near their $72 IPO price.

Shortly after their debut, Lyft shares were the market’s most expensive stocks to short, with short fees of over 100% annually. Borrow rates have since fallen from early trading to the 10-20% level as more shares have been lent out to shorts. 

In order to be short stocks in US markets, short-sellers are forced to “borrow” the stock from actual holders. Shorting without such borrowing, which limits the quantity of shares shorted, is controversial and known as “naked” shorting.

Of the 30 million shares of LYFT float, over 60% are now available to borrow, according to data compiled by Bloomberg. For this reason Dusaniwsky notes that short-sellers have plenty of “dry powder” should they choose to size up their positions just as borrow rates begin to decrease.

For many IPOs, short-selling ramps up over the first few weeks of trading. Facebook, Snap, and Blue Apron are notable names that were attacked by shorts within three months of their IPOs.

Lyft stock chart


Join the conversation about this story »

NOW WATCH: The founder and CIO of $12 billion Ariel Investments breaks down how his top-ranked flagship fund has crushed its peers over the past 10 years