Global Markets: Short bets against First Republic rose to $376 million in past 30 days, say S3 Partners
1 min read 28 Apr 2023, 10:18 PM ISTReports states that short bets against the beleaguered First Republic Bank have been increasing in recent weeks, despite surging costs to borrow the company's shares, according to S3 Partners.
PremiumFirst Republic Bank plunged to a record low on Friday, after rising 14% banking on a rescue plan meet between US officials along with with the Federal Deposit Insurance Corp., the Treasury Department and Federal Reserve.
Reports states that short bets against the beleaguered First Republic Bank have been increasing in recent weeks, despite surging costs to borrow the company's shares, according to S3 Partners.
Short bets against the bank have increased by $63 million to $376 million over the past 30 days, Ihor Dusaniwsky, managing director of Predictive Analytics at S3, said in an email on Friday.
Reflecting a limited supply of shares to short, traders in some cases are paying borrowing fees equivalent to nearly 100% per year, Dusaniwsky said.
Short sellers borrow shares and then sell them, hoping to buy them back at a lower price before returning them.
According to Bloomberg, First Republic Bank’s membership in the S&P 500 could be in jeopardy after the troubled bank’s stock set a new all-time low that pushed its market capitalization below $1 billion.
The stock plunged more than 50% Friday and was halted multiple times for volatility amid reports that a Federal Deposit Insurance Corp. receivership is the most likely rescue scenario for the lender. Earlier in the week, the shares were beaten down after the bank’s earnings report showed a nosedive in deposits and raised further questions about its survival.
At roughly $600 million, First Republic has by far the smallest market cap in the US equity benchmark after wiping out $22 billion in market value. Companies must have a market cap of at least $12.7 billion to be considered for inclusion in the S&P 500, which has more than $15 trillion of investment assets tracking it.
First Republic shares have been under siege for more than a month following the collapse of SVB Financial Group’s Silicon Valley Bank and Signature Bank in March, both of which were also removed from the S&P 500. Its earnings report Monday showed a 41% drop in deposits during the quarter. And the firm is reportedly exploring divesting $50 billion to $100 billion of assets.