GO
Loading...

Enter multiple symbols separated by commas

Short Sellers Set to Target LinkedIn

Shares in LinkedIn are expected to come under downward pressure this week, as they attract the attention of aggressive traders who are prepared to bet on a fall in the business network’s stock price.

LinkedIn
Getty Images
LinkedIn

On Tuesday, restrictions on short selling the stock will be lifted.

A short sale involves borrowing stock and selling it, in the hope that the price falls and it can be bought back more cheaply – generating a profit.

“Brokers are forecasting, in the near term, that the stock is way overbought and that we should see a price decline as soon as the stock is available to short next Tuesday,” said Timothy Murphy, of Trade Monitor Idea, a platform that connects brokers’ trading recommendations with more than 170 hedge and quant funds, as well as “long-only” asset managers.

Mr Murphy said sell recommendations on LinkedIn are based on a short time horizon of five to 20 days. “People think it’s a good business with good prospects, but the valuation is stretched and the stock price is overdone,” he said.

Nicole Sherrod, managing director of the trading group at retail brokerage TD Ameritrade, said shorting the shares was a trending discussion topic among day traders.

In the past, technology companies, notably Amazon , have been big targets for short sellers betting that lofty valuations sparked by bullish growth prospects are too high.

However, complicating the picture for short sellers of LinkedIn is the small size of its float: just 9m shares, as the group sold only 10 per cent of its stock in the initial public offering.

“There’s no way you can find a borrow, there was such a limited amount of stock sold. It would be prohibitively costly to put on a short,” said Doug Martin, a trader at Kitano Capital, a private investment firm.

LinkedIn’s share price rose 109 per cent to $94.25 on Thursday, but fell to $93.09 on Friday.

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    Please choose a subscription

    Please enter a valid email address
    To learn more about how we use your information,
    please read our Privacy Policy.

Don't Miss

  • Mark Cuban and Donald Trump

    Donald Trump appears to have Mark Cuban's vote, at least in terms of how the billionaire real estate mogul is conducting his political campaign.

  • Ferrari 488 Spider

    Ferrari's new 488 Spider will have a V-8 turbo engine and a retractable hard-top roof that lowers in just 14 seconds.

  • Members of the New Horizons science team react to seeing the spacecraft's last and sharpest image of Pluto before closest approach later in the day at the Johns Hopkins University Applied Physics Laboratory (APL) in Laurel, Maryland July 14, 2015.More than nine years after its launch, a U.S. spacecraft sailed past Pluto on Tuesday, capping a 3 billion mile (4.88 billion km) journey to the solar system's farthest reaches, NASA said.

    The New Horizons Pluto flyby mission set records for NASA's social media and web metrics——but why do we care so much?

U.S. Video