Lyft is down more than 20% since its IPO and could fall even more once short-sellers are allowed to pounce
Lyft's stock price has sputtered since the ride-hailing company began trading on Friday, and it could stall even further when the IPO dust settles, a Wall Street data-analytics firm warned.
S3 Partners, which tracks short-interest data, said in a report Monday that it expected further downward pressure on prices once shares are available for lending to short-sellers, or those investors betting that a stock's price will 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," said Ihor Dusaniwsky, S3's managing director of predictive analytics.
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, Cboe Global Markets said in a press release on Monday.
Wall Street analysts who have launched coverage of Lyft so far agree that the stock is close to an appropriate valuation, with an average price target of $71, or roughly 4% above Tuesday's prices.
Lyft's stock price has sputtered since the ride-hailing company began trading on Friday, and it could stall even further when the IPO dust settles, a Wall Street data-analytics firm warned.
S3 Partners, which tracks short-interest data, said in a report Monday that it expected further downward pressure on prices once shares are available for lending to short-sellers, or those investors betting that a stock's price will 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," said Ihor Dusaniwsky, S3's managing director of predictive analytics.
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, Cboe Global Markets said in a press release on Monday.
Wall Street analysts who have launched coverage of Lyft so far agree that the stock is close to an appropriate valuation, with an average price target of $71, or roughly 4% above Tuesday's prices.