- Lyft’s stock price has plunged more than 25% since it began trading last week.
- That decline happened before short-sellers have been allowed to bet against the stock.
- As more shares are available for lending, more downward price pressure is expected by S3 Partners, a firm that tracks Wall Street short-interest data.
Lyft’s stock price has sputtered since the ride-hailing company began trading on Friday, and could stall even further when the IPO dust settles, a Wall Street data analytics firm is warning.
S3 Partners, which tracks short interest data, said in a report Monday that it expects further downward pressure on prices once shares are available for lending to short-sellers, or those investors betting a stock’s price to decline.
"With IPO shares not settled yet and therefore not physically in stock lending programs, and SEC regulations prohibiting IPO underwriters from lending out their shares to cover short sales for 30 days only a small fraction of the 34 million shares traded so far today are the result from short sales," Ihor Dusaniwsky, managing director of predictive analytics at S3, said.
Shares of Lyft began trading on the Nasdaq on Friday at $87 apiece before sinking into the red to end the week down 10%. Monday, the stock’s first full day of trading, saw shares slide another 6.7% to $69 — and the sell-off continued overnight into Tuesday.
"When the LYFT IPO shares begin settling tomorrow and lending programs see their lendable inventories grow, over the next several days we should see a dramatic increase in stock lending, short sale approvals and LYFT short selling," Dusaniwsky said.
"We can expect further price weakness when the shorts are allowed to put the pedal to the metal and redline their trading strategies."
Options contracts, which allow retail investors to somewhat mimic professional investors’ bets against a stock price, are also expected to launch on Thursday, Chicago-based Cboe Global Markets said in a press release on Monday.
Wall Street analysts that have launched coverage of Lyft so far agree the stock is close to an appropriate valuation, with an average price target of $71, or roughly 4% above Tuesday’s prices.
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