Facebook Shorting Costs Jump to Highest on 10-Point Scale

The cost to short sell Facebook Inc. (FB) has surged to the most-expensive level in a 10-point scale developed by Data Explorers Ltd., which said bets against the social-media company amount to 4.3 percent of shares sold in the company’s initial public offering.

About 18 million Facebook shares are on loan, an indication of short selling, London- and New York-based research company Data Explorers said in an e-mail, citing trades settled as of yesterday. Facebook’s underwriters sold 421.2 million shares to the public last week last week.

Facebook lost 18 percent through yesterday from its IPO price of $38. The social-media service and Morgan Stanley, the lead underwriter, increased the offering price to persuade the company’s backers to sell more of their stock, a person familiar with the matter said last week. Bill Gross, who helps run the world’s largest bond fund at Pacific Investment Management Co., said in reference to Menlo Park, California-based Facebook last week: “I know a bubble when I see one.”

“There’s definitely plenty of people taking the other side here of the tech IPO and thinking it’s a bubble,” Will Duff Gordon, senior research analyst at Data Explorers, said in an interview today on Bloomberg Television’s “In the Loop” with Betty Liu.

The loans represent about 1 percent of Facebook’s 2.14 billion Class A and Class B shares outstanding, according to Data Explorers. That compares with 5.3 percent for Zynga Inc. (ZNGA) and 4.1 percent for LinkedIn Corp. (LNKD), the data show.

Facebook stock on loan may change as more shares become available to borrow in the next few days, said Alex Brog, director of communications at Data Explorers.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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