Bets against Twilio climb thanks to fresh supply of shares
- Donald Trump Sworn in as 45th U.S. President
- Wall Street ends higher as Trump becomes president
- Walgreens Boots Alliance (WBA) Said to Face Antitrust Concern for Rite Aid (RAD) Fix - Bloomberg
- Bristol-Myers Squibb (BMY) Says It Won't Pursue Accelerated U.S. Regulatory Pathway for Opdivo Plus Yervoy in Lung Cancer
- Apple (AAPL) Sues Qualcomm (QCOM) Over Patent Royalties in Antitrust Case - Bloomberg
A banner for communications software provider Twilio Inc., hangs on the facade of the New York Stock Exchange (NYSE) to celebrate the company's IPO in New York City, U.S., June 23, 2016. REUTERS/Brendan McDermid
Get daily under-the-radar research with StreetInsider.com's Stealth Growth Insider Get your 2-Wk Free Trial here.
By Noel Randewich
SAN FRANCISCO (Reuters) - Bets against shares in Twilio Inc (NYSE: TWLO) have climbed in recent days, thanks in part to a recent follow-on stock offer that increased the supply of shares available to traders.
Twilio's shares were down about 5 percent in afternoon trading on Wednesday, adding to a recent sell-off in the San Francisco software company's stock following a June IPO and a meteoric rally. Short sellers attracted to Twilio's lofty stock price in recent months have ridden it lower and are showing no signs of relenting.
Twilio's software is used by large companies including Netflix (NASDAQ: NFLX), WhatsApp and Uber, allowing them to speak with and text customers without exchanging contact information.
After Twilio's stock hit a record high in September, short interest against it has increased by about 30 percent to about 7.5 million shares, equivalent to $250 million, according to S3 Partners, a financial analytics firm.
By mid-October, short sellers had borrowed virtually every share available in order to bet against the company, pushing the annualized interest rate they paid to the shares owners' up to 100 percent and temporarily putting a virtual stop to additional short positions.
Short sellers borrow shares and then sell them, hoping to repurchase them at a lower price and then return them to their owner. In the meantime, they must also pay interest to the owner.
Twilio on Oct. 20 sold an additional 7 million shares, mostly on behalf of existing shareholders, significantly increasing the number of shares available for lending and allowing short sellers to make new bets against the company.
Since then, the stock has fallen 22 percent, bringing Twilio's sell-off from the end of September to 50 percent.
"Shorts that couldn't get in before are now getting in," said Ihor Dusaniwsky, S3's head of research. "If the trend continues, in another couple of weeks you will be back up to a really expensive borrow."
Twilio is due to give its third-quarter results on Thursday. On Oct. 11, two business days after announcing plans for its follow-on share offer, Twilio reported preliminary third-quarter results that beat analysts' expectations.
Analysts are unusually cautious on Twilio, with just one recommending its shares and eight analysts rating the stock "hold", according to Thomson Reuters data. None recommend selling.
(Reporting by Noel Randewich; Editing by Tom Brown)
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Keane Group (FRAC) IPO Opens Up 16%
- Mexico deports 91 Cubans after U.S. ends 'wet foot, dry foot'
- Trump trade strategy starts with quitting Asia pact: White House
Create E-mail Alert Related CategoriesReuters
Related EntitiesSecond Curve Capital, S3, IPO
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!