May 15, 2019

After going "naked" for IPO, Uber faces real short sellers

Illustration: Aïda Amer/Axios

Uber's underwriters, led by Morgan Stanley, were so worried about the company's IPO that they deployed "a nuclear option" ahead of the deal last week to provide extra support for the stock — a so-called naked short, as CNBC's Leslie Picker reported Tuesday.

The catch: Now, actual short sellers are coming in at significant levels and could push the stock even further below its $45 IPO price.

What it means: Every IPO includes an excess amount of shares that allow underwriters to sell 115% of the available offering and then buy the additional 15% back, Picker explains. That extra 15% can support the stock's price if it falters.

  • But in Uber's case, they opened a naked short, allowing underwriters to sell more than the "greenshoe" portion and then buy the shares back, providing "even more firepower."

The bottom line: That plan came up short as Uber's stock fell 18% in its first days as a public company before recovering Tuesday with a 7.7% gain.

What to watch: Actual short bets against Uber now total $768 million, with short sellers holding 11.5% of available shares, according to data from Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.

  • "We expect Uber short interest to increase over the next several days as short sellers continue to be active," Dusaniwsky said in a statement.

Go deeper: Uber's massive IPO sinks investors

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Stocks fall 4% as sell-off worsens

A trader on the floor of the New York Stock Exchange. Photo: Johannes Eisele/AFP via Getty Images

Stocks fell more than 4% on Thursday, extending the market’s worst week since the financial crisis in 2008 following a spike in coronavirus cases around the world.

The big picture: All three indices closed in correction territory on Thursday, down over 10% from their recent record-highs amid a global market rout.

Coronavirus updates: California monitors 8,400 potential cases

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens.

33 people in California have tested positive for the coronavirus, and health officials are monitoring 8,400 people who have recently returned from "points of concern," Gov. Gavin Newsom said Thursday.

The big picture: COVID-19 has killed more than 2,800 people and infected over 82,000 others in some 50 countries and territories. The novel coronavirus is now affecting every continent but Antarctica, and the WHO said Wednesday the number of new cases reported outside China has exceeded those inside the country for the first time.

Go deeperArrowUpdated 1 hour ago - Health

Watchdog opens probe into VA secretary over handling of sexual assault claim

VA Secretary Robert Wilkie on Fox Business Network’s "The Evening Edit" on Jan. 7. Photo: Steven Ferdman/Getty Images

The Department of Veterans Affairs Inspector General Michael Missal said Thursday he had opened an investigation into VA Secretary Robert Wilkie after lawmakers demanded an inquiry into his handling of a sexual misconduct report, the Washington Post reports.

Context: Wilkie allegedly "worked to discredit" the credibility of Democratic aide and veteran Andrea Goldstein after she reported last fall "that a man groped and propositioned her in the main lobby of the agency's D.C. Medical Center," a senior VA official told the Post.