Short Bets on Snap Are Cheap Thanks to Retail InvestorsBy and
Strong interest from retail investors is driving down the borrowing fees for shorts betting against Snap Inc.’s $25 billion valuation, according to financial analytics firm S3 Partners.
For the past three days, those seeking to bet the stock will drop have been asked to pay borrowing fees at an annual rate of 1 percent of the share price, said Ihor Dusaniwsky, S3’s head of research. That compares to rates as high as 40 percent last week.
"What has surprised us and the broker community is the amount of retail holders in the name, which has lessened the need for prime brokers to go to custody banks to borrow shares in order to cover short sales," Dusaniwsky said. "This is the primary reason why stock borrow rates have come down so fast after the IPO."
"We expect rates to stay low unless there is a huge influx in new short demand in the near future," he added. As of March 10, short sellers held 6.5 percent of Snap’s float, according to Markit Securities data.
Today’s total put volume is outpacing call volume 2.7 to 1, similar to the first day of options trading on Friday. April $18 puts are the most actively traded contract with over 5,000 changing hands today, compared to 38,000 on Friday.
Snap shares fell 4.4 percent today to $21.09, their lowest since March 7 in a third straight day of losses.