Short Sellers Are Circling GoPro
Short sellers, who bet on price declines, have noticed GoPro's huge run up since its public debut on June 26, and after a nearly 100% gain, traders are starting to bet the shares will fall in price.
Near noon in New York, shares of the wearable camera company were down about 9%.
To sell a stock short, an investor must borrow the shares with the goal of reselling them at a lower price. Not all of the "float," or the outstanding shares of a company that can be traded, are eligible for borrow.
Karl Loomes, a market analyst with SunGard's Astec Analytics, says his data shows nearly all of the available borrow for GoPro has been spoken for.
Loomis:
"Although still early days, data from SunGard's Astec Analytics shows the cost of borrowing GoPro shares - borrowing being the prerequisite of short selling them - has immediately become one of the highest on our system. Likewise the utilization level, i.e. the percentage of shares that are available on loan actually being borrowed, is near 100% - again one of the highest on our system. Together both these figures suggest borrowers are snapping up all the available GoPro shares they can, and are willing to pay a high price to do so."
In each of its first four days as a public company, GoPro shares rallied sharply, and during Tuesday's trading session shares at one point traded north of $48, more than double where the company's IPO priced.
"It wouldn't surprise me if this is a bet against the immediate increase in share price, and not necessarily a bet against the company," Loomes said in a phone interview with Business Insider.
Loomes added that short-sellers often don't have the weight to move a stock the way some people think, and that today's weakness in GoPro probably has more to do with the run higher than any specific bets against the stock.
As with any newly issued stock - or any stock that doubles in price over just four trading days - volatility is to be expected.
Even in a big year for IPOs, GoPro's early performance was notable, and after getting the attention of buyers willing to bid the stock higher, it seems the other side of that trade is getting organized.