Investors extended their bets against Lyft shares in recent days as rival ride-sharing business Uber moved closer to its own stock market listing.
Short selling interest had risen to nearly two-thirds of the shares that Lyft floated at the end of March, according to the research group S3 Partners, helping push the stock down as low as $57.66 on Friday, versus its offering price of $72.
After an initial pop at its Nasdaq debut two weeks ago, Lyft shares have performed badly, leading to recriminations and stoking a debate about the heavily lossmaking company’s long-term prospects.
“We are seeing over one million shares of additional short selling [on Friday] morning, which is adding downward pressure to the long selling that has hampered this stock since its issuance,” said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.
The prospectus for Uber’s upcoming initial public offering, published on Thursday, emphasised the intense competition among ride-sharing apps. It showed Uber burning through large amounts of money to maintain its market share, while growth in its core business stalls.
Uber plans to raise about $10bn next month at a valuation of as much as $100bn.
Lyft short interest totalled $944m on Friday, or 15.47m shares, S3 said. That is the equivalent of 64.7 per cent of its free float — that is, the shares that are available for trading — making Lyft the fourth-biggest US short position tracked by S3. The only companies that have short positions at a higher percentage of their float are: the biotech company Polarityte; Health Insurance Innovations, which operates a technology platform focused on health; and life insurance and department store Dillards.
Short interest in Lyft already totalled 40 per cent of the float by the end of its second day of trading and has steadily been increasing since, S3 said.
Shares in Lyft fell as much as 5.5 per cent on Friday before trimming losses to close down 1.8 per cent at $59.90.
While investors who bought at the IPO or shortly after were nursing losses, Lyft short sellers were up $43m in mark-to-market profits on Friday, bringing the total post-IPO gain to $202.4m, S3 calculated.
Lyft declined to comment.
The company raised more than $2bn in the IPO, and now has a market capitalisation of about $17bn. Some analysts said the company had been overpriced.
“Lyft could have run a process to reveal the right price for its shares but instead seemed to be solving for the short-term highest price for its shares,” said Rett Wallace, co-founder of Triton Research.
Lyft last week threatened Morgan Stanley with legal action over a report that the investment bank arranged so-called short sales for investors who bought shares before the IPO. Typically, investors are supposed to abide by a lock-up agreement that prevents them from selling until later this year.
Additional reporting by Shannon Bond in San Francisco
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