Traders are paying "extortionate fees" of 15% to 20% to borrow shares of Snap in order to short them, according to figures reported by Simon Colvin, a research analyst at IHS Markit.
Snap shares surged 44% in their March 2 debut and hit a high of $28.84 the following day before short sellers emerged, driving the price below $21 on Tuesday. Snap recovered a bit on Wednesday, settling at $22.81.
While the fees are "extortionate," they're still well below the 45% that traders paid to short Facebook (NASDAQ:FB) shares in the days following their debut May 2012 debut. Snap's fees are more in line with the 19% that traders paid to short Twitter after it went public in November 2013. Notably, short sellers were ready to pay a huge fee of 105% to go short Groupon shares.
According to calculations by Reuters, short sellers borrowed about 1.5% of all freely traded Snap shares on March 7 (first day the shares became available for borrowing in the market).
Here's how borrowing fees on Snap shares compared to other social media IPOs.
IHS Markit