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Shares of ride-hailing service Lyft, Inc closed Tuesday 4% below their IPO price of $72, however that belies the volatility of the first three days of trading. The shares opened above $87 on Friday, the first day of trading, so yesterday’s close reflects a 26% decline from the intraday peak.
Tuesday April 2 was the first settlement day for LYFT shares, which means short sellers are able to borrow shares to settle short sales. IHS Markit Securities Finance receives intraday reporting of borrow transactions from market participants, which allowed those contributors to see 1.56m shares in new borrows yesterday which were lent out at just over 100% annualized fee.
In the overnight settlement reports we see 6.61m shares reported as on-loan, a market value of $455m, which serves as the best proxy for the current short position. Borrow fees range from 85% to 150%, however the majority of activity has been just over 100% fee (meaning a short seller would be pay 100%/365 per day, or 27bps). That makes LYFT the most expensive to borrow US equity with over $5m in balances.
New IPOs often attract short sellers, who seek to capitalize on falling momentum after an IPO. Timing is the key, which is why short sellers are often willing to pay extraordinary borrow fees for IPOs. Even successful companies often stumble out of the gates, for example Facebook shares fell more than 50% during their first three months of trading before rallying more than 800% off the lows. On the other end of the spectrum, shares of Blue Apron doubled in price during their first three months of trading, before falling 75% from the peak.
