Uber Bears Already Snapped Up 70% of Shares Available to Short
While Uber’s post-debut decline is less than half that of Lyft, it’s seen a bigger increase in short interest.
(Bloomberg) -- Want to bet on losses in Uber Technologies Inc.? The number of shares available to do that is starting to run low.
The ride-hailing company has been public for less than a month, but bears have already moved in on almost 70% of the shares that can be lent out for short selling, data compiled by IHS Markit show. That’s up from 50% on May 15, days after Uber’s trading debut.
Uber, the biggest IPO of the year, has started on a weak footing. Concerns have ranged from the size of the ride-hailing market and the company’s ability to push into autonomous cars to investors’ appetite for riskier assets amid a worsening U.S. - China trade spat. The shares have fallen 9% from their $45 offering price.
While the growing short interest hasn’t yet taken a significant toll on the cost to borrow the stock, fees will likely start to bite if the amount of lendable shares available drops much further, according to Samuel Pierson, director of Securities Finance at IHS Markit. “The utilization of lendable shares reaching 70% generally coincides with a marginal increase in borrow costs,” he said by email. “Once utilization reaches 80%-90% borrow costs often become a meaningful consideration for short sellers.”
The potential pain to come can be seen in the cost of borrowing shares of its competitor, Lyft Inc. With more than 80% of Lyft’s lendable stock out on loan, the cost to borrow shares for new shorts hovers near 35% on an annualized basis, IHS Markit data show. That compares to somewhere between 1% and 2% for Uber, though its free float is about 5.5 times larger, which accounts for part of the difference. The borrow cost for Apple Inc. and Alphabet Inc. is about 0.25% to 0.5%.
While Uber’s post-debut decline is less than half that of Lyft, it’s seen a bigger increase in short interest, particularly over the past week. Last week, Uber’s short interest more than doubled to 36 million shares, while Lyft’s went from 21.7 to 23 million shares, according to data compiled by IHS Markit.
That’s out of sync with sell-side analyst calls. Four of those covering Uber recommend buying the stock, while five say hold and none recommend selling. Lyft has 16 buy, seven hold and two sell recommendations.
To contact the reporter on this story: Elena Popina in New York at epopina@bloomberg.net
To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Morwenna Coniam, Richard Richtmyer
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