The following is an excerpt from Megan Davies | June 11, 2017 | reuters.com |
Short-sellers placed more bets that shares of social media company Snap Inc would continue to fall on Tuesday, representing about 2.4 percent of trading volume in the stock, even though Snap is one of the most expensive shares on Wall Street to borrow.
Around 600,000 shares were shorted in morning trading, according to Ihor Dusaniwsky at S3 Partners, a financial analytics firm.
"Snap is one of the most expensive stocks to borrow on the Street right now," said Dusaniwsky. "For a stock that's that expensive, its quite a lot of demand."
Short sellers borrow and then sell stocks they think will fall in value, hoping to profit by buying the stock back more cheaply later on and returning it to its owner.
There was an initial rush to short the stock after its March initial public offering.
On Tuesday, Snap shares hit their lowest point since trading began after lead underwriter Morgan Stanley downgraded the stock and raised concerns about the company's ability to compete against rival Instagram.
In total, Snap short interest is now $1.19 billion, down $245 million, or 17 percent, from its historical high of $1.44 billion that it hit on June 1.
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