Lyft Short Sellers Are Jumping Ship Following Lockup Expiration

Lyft Inc LYFT shares are down another 24.6% in the past month, but Lyft longs may have a new reason for optimism.

Earlier this month, Lyft announced it was moving its IPO lockup expiration date up one month to Aug. 19. Lockup expirations often trigger weakness in a stock leading up to the expiration and.or immediately after due to new shares potentially hitting the market for the first time.

Lyft was no exception, as shares dropped 14.2% in the time between the announcement and the lockup date and another 4.4% in the days since. However, S3 Partners analyst Ihor Dusaniwsky said Tuesday Lyft’s massive horde of short sellers appears to be cashing in on their gains.

Aggressive Short Covering

Lyft has an outstanding short position of 14.95 million shares worth $765 million. However, Dusaniwsky said that short position has dropped by 11.73 million shares, or about 43%, since Aug. 7. Short percent of float has plummeted from 63.9% to 7.6% in that time.

Many of these short sellers are simply cashing in on big gains since Lyft’s IPO priced at $72 per share back in March. The stock has since tumbled 31% to under $50, and Lyft short sellers have made a $311.5 million profit.

Dusaniwsky said Lyft has seen the single largest decline in shares held short of any U.S. equity since Aug. 7, suggesting many Lyft short sellers appear to be moving on to their next idea.

Not Out Of The Woods

While an exodus of short sellers is good news for Lyft bulls, Dusaniwsky said there’s still cause for concern in the near-term given the stock’s recent weakness.

“It looks that short covering has now leveled off, and if long selling continues to hit the tape, we should see continued LYFT price weakness as there will be no short side based offsetting buying pressure on the stock,” Dusaniwsky said.

In fact, Dusaniwsky said there may still be a large number of company insiders waiting for an opportune time to unload their shares following the lockup expiration.

Lyft's stock traded around $48.43 per share at time of publication.

Related Links:

Lyft's Quarter Shows Ride-Sharing Market Strength

Former Google, Uber Self-Driving Tech Engineer Levandowski Indicted On IP Theft Charges

Photo courtesy of Lyft.