Short sellers with a gloomy view of the ride-hailing industry may soon switch lanes from Lyft Inc. to Uber Technologies Inc.
Though total short interest in both Uber
is comparable in terms of dollar value, it’s far more expensive to bet again Lyft. Uber shorts currently incur a stock-borrow rate of about 2.5%, according to financial technology and analytics firm S3 Partners, while new Lyft shorts incur a fee of 60% to 70%.
“This is a trade where net alpha is now decreasing and could cause some shorts to close their positions if their target Lyft price does not produce enough of a return to justify the high financing rates,” said Ihor Dusaniwsky, managing director at S3. “With Lyft becoming the more difficult and expensive short of the two, we may see short sellers move into Uber shorts.”
Uber short interest currently stands at $846 million, representing 21.2 million shares shorted or 11.8% of the float. Lyft short interest amounts to $1 billion, representing 20 million shares shorted, or more than 61% of the float. Uber shares began trading on Friday, while Lyft went public in late March.
Dusaniwsky said that Uber’s current stock-borrow fee of about 2.5% “remains relatively cheap for an IPO with this size and buzz.” He sees stock-borrow rates falling for Uber and potentially nearing 1% over the next couple of days.
Uber shares had a disappointing debut, falling 7.6% on their first day of trading. They’re still trading below the offering price of $45. Lyft’s stock has also sputtered since the March offering, with shares off 24% from the IPO price of $72.