May 26 (Bloomberg) -- Investors unable to short sell LinkedIn Corp., which just completed the hottest U.S. stock offering since at least 2006, can start betting against the shares using options tomorrow.
The cost to borrow LinkedIn stock to short them is rated a 10 by Data Explorers, the highest level on the research firm’s scale.
“Since the cost of shorting the shares is so much, that’s the route people are going to take,” Patrick Mortimer, director of options trading at Pipeline Trading Systems LLC in New Hope, Pennsylvania, said of the equity derivatives. “They’re going to be coming after puts, and market makers are going to be raising their offers.”
LinkedIn is worth $30 to $35 based on a forecast for earnings before interest, taxes, depreciation and amortization of $104 million in 2012, Haverty said this week. The shares have been driven higher by scarcity that won’t last, said Haverty, Kevin Shacknofsky of Alpine Mutual Funds and Brian Barish of Cambiar Investors LLC.
“The short-selling data is showing us that there are people who couldn’t wait for the options market to start trading LinkedIn before they initiated their bet against the company,” said Will Duff Gordon, a senior research analyst at Data Explorers, in an interview in New York. “If you think something’s overvalued, then the quicker you bet against it the better, even if the stock is hard to borrow.”
LinkedIn Options Finally Start Trading
LinkedIn was trading at a PER of 1450 yesterday, and my price target for this dog is about $5. Unfortunately, it's not possible for me to short the share yet (my broker doesn't have shares to short...). But luckily, options have started trading yesterday.