Sunday, October 05, 2014
Shorting GoPro Is One Pricey Bet
Short sellers have to pay a pretty hefty premium these days to bet against camera maker GoPro Inc.
GoPro’s stock has more than tripled from its trading debut in June and is the best-performing U.S.-listed initial public offering this year, according to Dealogic. The rally has made GoPro a ripe target for short sellers to bet on a drop from such elevated levels.
But to do that, the shorts need to pay a hefty price tag.
“GoPro is currently one of the most expensive stocks to borrow among all U.S. equities,” Andrew Laird, analyst at securities-financing tracker Markit, said in an email to MoneyBeat. Nearly all of the shares available for lending have been borrowed, he said, and the cost to borrow the stock has surged to among the highest levels since GoPro’s IPO in June.
“Currently investors are willing to pay close to 100% (annually) of the value in order to borrow shares,” Mr. Laird said. “This is extremely high by any standard and is a factor of both strong demand to short from the buyside and limited supply.”
Short sellers borrow shares to sell them in hopes of buying them back cheaper at a later date, aiming to profit from a price decline.
While the demand for shares to short is pushing against the available supply, the percentage of GoPro shares on loan — a proxy for short-selling activity — isn’t wildly outside the norm. As of Wednesday, it stood at about 2.5% of shares outstanding, according to Markit. That’s above the average short interest for the S&P 500 at about 2.2%.
GoPro makes wearable high-definition videorecorders that first appealed to surfers and cyclists seeking ways to record cool tricks before surging in popularity among the general public.
Shares are up about 250% from GoPro’s $24 IPO price. But trading in the stock also has been erratic. The stock fell as much as 14% on Thursday after the company said its founder, Chief Executive Nicholas Woodman, and his wife, Jill Woodman, gave 5.8 million Class A shares worth about $500 million to a charitable foundation. The couple had been restricted from selling the shares until six months after the June IPO, but sidestepped a so-called lockup agreement and transferred the stock.
Shares rose about 11% on Sept. 29 after the company unveiled a slew of new cameras. The stock also fell 15% on Aug. 1 after the company reported earnings.
GoPro shares rose 3.1% to $88.14 Friday afternoon.
Posted by Bud Fox at 7:11 AM