- Short interest in Snapchat parent rises to 28% of free float
- Facebook faced half as much shorting at same point after IPO
Snap Inc. is the most-shorted tech initial public offering of the year, with a growing number of traders betting the stock will fall.
Investors are skeptical that the company, which owns the Snapchat photo-sharing app, can grow quickly enough to justify its valuation — now at about $22 billion — given aggressive competition from Facebook Inc., which has been copying some of Snapchat’s features. That’s helped drive short interest in Snap up to 28 percent of the free float, or shares available to be traded publicly, according to data from Markit Group Ltd. The increase comes before the first lockup expiration on the shares — on July 30 — when certain stakeholders and executives will be free to unload their positions for the first time since the March 1 IPO.
The stock fell 3.6 percent to $18.85 at Thursday’s close in New York. Earlier, the shares dropped as much as 7.1 percent for the biggest intraday decline since May 11, the day after Snap’s earnings report showed the company missed user growth and sales estimates. The shares sold for $17 apiece when the company went public in March.
“It looks like short sellers are positioning themselves for a dramatic selloff in Snap’s stock price after the lockups expire,” Anthony DiClemente, an analyst at Nomura Instinet, wrote in a research note on Wednesday.
An investor successfully shorts a stock by borrowing a number of shares from a broker, paying the broker a stock-loan…