Contributor: Tim Smith
Viewing the movement of securities lending volumes and prices for stocks during the day can provide a detailed picture of market sentiment on a minute-by-minute basis. This can be especially useful after a major announcement.
It is apparent that the price movements and market sentiment responses to corporate news are more immediate with social media associated stocks than they are with traditional manufacturing companies. Perhaps this is not so surprising given the will o’ the wisp nature of the former. At the end of the day, if Caterpillar is in trouble, you have a stockpile of large dumpers and diggers to play with in your personal sandbox, but what have you got with Internet and social media companies?
Today, the arcane market of securities lending watched for Facebook’s first earnings announcement. Facebook’s stock price was affected by the poor results from Zynga yesterday on July 25, but what were the short sellers going to do?
Well, writing at midday Thursday, July 26, the early morning was quite slow to get going, which was remarkable for its “unremarkableness.” Certainly, there was not much borrowing of shares to support increased short selling activity in either Zynga or Facebook by mid-morning. However, things have started to move since then.
By lunchtime, according to our real-time data, the cost of borrowing Zynga shares had doubled to about 1% per annum as had the cost to borrow Facebook, which rose to 0.85% per annum. In addition, the volume borrowed of Zynga shares had increased by nearly 2 million shares on an already outstanding borrowed volume of about 20 million. While not as large an increase was seen in Facebook volumes, it was ticking up slightly.
It remains to be seen what might happen following Facebook’s announcement after the close of trading.
While you’re here…