Why Longfin Shouldn't Blame Short Sellers

Longfin Corp LFIN stock has been all over the map lately, plummeting 80 percent in a two-week stretch before surging 80 percent Thursday after CNBC interviewed CEO Venkat Meenavalli.

What Happened

The Longfin story has numerous moving parts at the moment, including FTSE Russell adding and then quickly dropping Longfin from its indices and a recently disclosed SEC investigation into the company.

In the new interview, Meenvallis blamed short sellers for Longfin stock’s precipitous decline. Short sellers are “going to destroy us,” Meenavalli said, telling CNBC he plans to contact the SEC and FINRA about the situation.

Why It’s Important

Ihor Dusaniwsky, managing director of predictive analytics at financial analytics firm S3 Partners, told Benzinga that Longfin’s problem is not short sellers.

Only about 1.1 million shares of Longfin stock are presently held short, representing a value of about $18 million, Dusaniwsky said. Since its IPO in December, Longfin has averaged nearly 1.1 million in daily trading volume, suggesting short sellers are likely not responsible for much of the stock's move.

“There is very little stock loan availability in this name, with just scraps available to borrow right now and no one being able to put on any shorts in size right now,” he said.

New Longfin borrowers are paying a staggering annual fee between 200 and 300 percent just to get their hands on shares at the moment, Dusaniwsky said. In addition, Longfin’s outstanding short interest peaked on March 23 and has been dropping ever since.

“Shorts have not been the main culprit driving LFIN’s stock price down — long shareholders selling their positions are primarily responsible for LFIN’s price weakness."

What’s Next

If Dusaniwsky is correct, Longfin might need to look for another excuse for its poor stock performance or give long shareholders a good reason to stop dumping the stock.

At time of publication, the stock was up 74 percent at $20.20.

Related Links:

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