The cost to short sell Facebook Inc. (FB:US) has surged to the most-expensive level in a 10-point scale developed by Data Explorers Ltd., which said bets against the social-media company amount (FB:US) to 4.3 percent of shares sold in the company’s initial public offering.
About 18 million Facebook shares are on loan, an indication of short selling, London- and New York-based research company Data Explorers said in an e-mail, citing trades settled as of yesterday. Facebook’s underwriters sold 421.2 million shares to the public last week last week.
Facebook lost 18 percent through yesterday from its IPO price of $38. The social-media service and Morgan Stanley, the lead underwriter, increased the offering price to persuade the company’s backers to sell more of their stock, a person familiar with the matter said last week. Bill Gross, who helps run the world’s largest bond fund at Pacific Investment Management Co., said in reference to Menlo Park, California-based Facebook last week: “I know a bubble when I see one.”
“There’s definitely plenty of people taking the other side here of the tech IPO and thinking it’s a bubble,” Will Duff Gordon, senior research analyst at Data Explorers, said in an interview today on Bloomberg Television’s “In the Loop” with Betty Liu.
The loans represent about 1 percent of Facebook’s 2.14 billion Class A and Class B shares outstanding, according to Data Explorers. That compares with 5.3 percent for Zynga Inc. (ZNGA:US) and 4.1 percent for LinkedIn Corp. (LNKD:US), the data show.
Facebook stock on loan may change as more shares become available to borrow in the next few days, said Alex Brog, director of communications at Data Explorers.
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