November 14, 2013 / 8:28 PM / 5 years ago

Cost to borrow Twitter shares drops, interest wanes

NEW YORK (Reuters) - The cost to borrow Twitter’s stock dropped further on Thursday thanks to a growing supply of shares available for loan, including to traders looking to bet on a decline in the share price, data showed on Thursday.

The Twitter logo is displayed on the floor of the New York Stock Exchange, November 8, 2013. REUTERS/Brendan McDermid

Investors searching to borrow Twitter must pay nearly 5 percent on an annualized rate, down from a peak near 20 percent the day before and after ending Wednesday close to a 13 percent rate, according to the latest available data from SunGard’s Astec Analytics.

About 9 million shares were out on loan including the 5.5 million total borrowed to late Wednesday.

“Today’s numbers are showing a cooling off,” said Timothy Smith, executive vice president at Astec Analytics.

“This interest would appear to be getting smaller minute by minute.”

Utilization of available supply at the end of the day Wednesday was close to 37 percent, he said.

Short sellers borrow shares and sell them in the expectation of a price drop, after which they buy them back at a lower price, return them to the lender, and pocket the difference. Shorting is also used as a hedging strategy.

Twitter shares rose 4.7 percent in afternoon trading on Thursday to $44.60, about 71 percent higher than the IPO price of $26. The stock debuted on the New York Stock Exchange at $45.10 a week ago and touched a high of $50.09 on that day.

Buy or hold recommendations from research analysts on Wall Street outnumber advice to sell Twitter shares by 11 to two according to Reuters data. Price targets on the shares range from $20 to $54.

Reporting by Rodrigo Campos; Editing by Leslie Gevirtz

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