Lyft Inc., just days into its existence as a publicly traded company, is drawing unwanted interest from Wall Street’s pessimists.
Traders who bet that the stock will decline are piling into the ride-hailing company. These short-sellers borrow and sell the shares, aiming to buy them back at a lower price sometime in the future.
One way to gauge their interest in a stock is to look at the number of shares that are being lent, and as of Tuesday, 6.6 million shares, or US$455-million worth of Lyft, were on loan, according to the data provider IHS Markit. That was equal to 20 per cent of the shares actually available for trading, known as the float.
By comparison, just 2 per cent of Twitter Inc.’s float, and a similar amount of Snap Inc.’s, was on loan at the same point after their initial public offerings. For Facebook Inc., that percentage was 5 per cent.
Currently, the shares on loan from Facebook and Twitter total fewer than 1 per cent, and at Snap they’re nearly 9 per cent.
The percentage of shares on loan at Lyft is roughly equal to the level at Tesla Inc., the electric carmaker, whose chief executive has waged a very public fight with short-sellers, accusing them of conspiring to bring down his company.
Since making its public market debut Friday, Lyft’s stock has stumbled. Shares are trading at US$70, below Lyft’s IPO price of US$72 and off more than 20 per cent from their opening trade.
Lyft’s performance is not unusual. Facebook fell below its offer price during its first week, and Snap traded well below its opening price in its first week.
But the ride-hailing company’s debut was a test of investor appetite for fast-growing but unprofitable tech companies. While Lyft’s revenue more than doubled last year, it lost nearly US$1-billion, and a number of Wall Street analysts have questioned whether it can maintain its current growth trajectory.
The short-sellers are betting it can’t.