Investors betting against SpaceX are finding it increasingly convenient to borrow shares in the company, even as short interest in the stock has climbed to between 5% and 7% of its total float — representing roughly 40 million shares — according to data from S3 Partners.
Sam Pierson, director of research at S3 Partners, noted that conditions have become more favorable for short sellers. “Shares are getting easier to borrow,” Pierson said, adding that borrowing costs currently sit at around 60 basis points.
While that rate is higher than the approximately 30 basis points seen for stocks with the lowest borrowing costs, Pierson explained that the figure actually signals a healthier supply of available shares and suggests funds considering short positions are not worried about finding shares to borrow.
Short selling works by borrowing shares, selling them, and then repurchasing them later at a lower price to pocket the difference. When the supply of available shares is tight — as often happens with newly listed companies that have limited floats — borrowing costs can spike, making short positions more expensive to maintain.
The high valuation placed on Elon Musk’s rockets-and-artificial-intelligence company is expected to attract short sellers hoping to profit from a price decline. However, several factors may give those investors pause, including strong interest from both retail and institutional buyers, as well as Musk’s well-known history of publicly and aggressively going after those who bet against his companies.
On Tuesday, SpaceX shares climbed approximately 6%, reaching $164.04, though they dipped as low as $147.11 at one point during the trading session.
