• Research

Aug 29, 2016

S3 BLACKLIGHT: Hot IPO Equates To Hot Borrow In Sec Lending Marketplace

Twilio Inc. (TWLO US), the cloud communications platform company, is up over 250% since listing its shares in June, making it one of the best performing IPOs for 2016.  This success has certainly caught the attention of short sellers who believe it’s currently overvalued, as latest levels to borrow stock are hitting 85% fee today.

According to the S3 Crowding Indicator, a measure of the magnitude of real-time shorting activity relative to market cap and float, we have seen two consecutive weeks of crowding since the stock price hit its peak on Aug. 15th.  Borrow capacity is close to fully utilized now and short interest is currently estimated to be at its post-IPO high of $180mm, up 65% from the end of July.  This would indicate whenever any borrow becomes available, short sellers take down the supply and are not deterred at these expensive levels.  

Looking ahead, IPO lockup expiry is slated for Dec. 20, the first trading day when insiders and majority stakeholders are allowed to sell shares to take profits.  This should result in a price drop with additional liquidity hitting the market, and further price pressure coming from short sellers.  Anticipate this IPO to cool as we approach year end, and borrow remain hot.  

For more information on the above analysis, please contact:
Matthew Unterman, Director, S3 Partners, LLC    
Matthew.Unterman@s3partners.net

The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.


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