The Morning Brief: Short Sellers Left Hanging as Snap’s Stock Price Declines

Shares of hedge fund favorite Snap fell another 2.8 percent to close at $14.08. This is nearly 18 percent below its initial public offering price of $17 a share. Still, short sellers are not making as much money as one might think. Short interest declined by $273 million in July to a current $1.003 billion after peaking in June at $1.44 billion, according to S3 Partners, a financial data, analytics and services firm. It attributes this sharp decline in short interest to tight supply, which has driven up the cost to borrow the stock to support the short positions. It figures Snap’s shares need to decline by 5 percent each month to cover financing costs alone. However, this situation could change soon. S3 says 1.2 billion shares will be released from their lockup constraints over the next 5 weeks from early investors, employees, directors and founders. Snap’s lock-ups for insiders expire on July 29 and August 29. This new huge number of shares will replenish the lending pool and reduce stock borrow rates.

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Ricky Sandler’s Eminence Capital disclosed that on July 14 it owned nearly 1.9 million shares of CyberArk Software, or 5.4 percent of the security software company. The filing indicates the position is passive. Eminence owned about 415,000 shares of the company at the end of the first quarter. We probably won’t know its second-quarter holdings for about three weeks.

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Shares of hot-shot stock Alphabet, the parent of Google, fell more than 3 percent in after-hours trading on Monday, even though the search giant reported second-quarter earnings and revenues that beat expectations. The “C” shares closed Monday’s regular session at $980.34 while the “A” shares closed at $998.31.