Snap Stock: Is A Short Squeeze On Tap?

Snap stock has been a hugely popular short position since the moment it first became available to borrow, and it’s still so popular that some short-sellers may be about to get squeezed out of their positions. Snap stock is on the rise today — surprisingly — but at the time of this writing, it’s probably not enough to be a short squeeze unless it’s in the extreme early stages.

Snap stock short interest hits $1 billion

Earlier this week, short interest in Snap stock surpassed $1 billion, according to financial analytics firm S3 Partners. The firm also explained that short interest in the name has been range-bound between $730 million and $900 million during the second quarter thus far.

However, S3’s Ihor Dusaniwsky added that when Snap stock tested the $18 support level, short-sellers boosted their positions as it rallied near $21. As of this writing, Snap stock is closing in on $21 again. Short interest in the name reached $1 billion on Tuesday after nearly $200 million of new short activity in the week before, including Tuesday.

Nowhere for Snap stock to go but up

As far as shorts go, Snap stock has been a profitable one, according to Dusaniwsky. Short-sellers were up $44 million from the IPO through Tuesday, so it’s no wonder short-sellers tacked $174 million onto their position since the end of the first quarter. Short interest in the name quickly hit $827 million within the first month after the initial public offering on March 2.

He explained that $1.001 billion is a key milestone. There can be very little growth beyond that because it means almost all of the Snap stock that was available to borrow is out on loan.

A short squeeze in Snap stock?

It has also gotten more expensive to borrow Snap stock, as borrow rates on existing shorts have climbed to a fee of 5% to 7%. It’s even more expensive to open a new short position, Dusaniwsky added, as borrow rates for new positions have skyrocketed to fees of 45% to 60%. He also expected rates on existing short positions to quickly rise because he said on Tuesday that there was “virtually no stock borrow supply left.” Additionally, lenders had recalled more than 1.5 million shares.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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