An increasing number of investors are betting that both Citibank (NYSE: C) and Bank of America (NYSE: BAC) will see significant drops in their stock prices in the near future, based on new data released from the New York Stock Exchange on Wednesday afternoon.
The data released on Wednesday showed shorting activity for the first half of the month of February and indicated that many more investors are placing “short” bets on Citibank and Bank of America. A short interest in a stock refers to the number of shares that are lent out to investors who are betting that a stock price will fall. If the stock does fall, they can buy the share at the lower price, pay back the lender, and keep the difference.
Interest in shorting Citibank has risen several times during the last few months. Bank of America has also been a target of short selling. In the month of December alone, the short interest on Bank of America tripled when the bank issued nearly $20 billion of new stock to pay back its debt to the federal government under the Troubled Asset Relief Program.
Wells Fargo issued about 50 million new shares, which represented less than 1% of the company’s 5.2 billion outstanding shares. Bank of America’s 344 million new shares represented about 4% of its total 8.65 billion shares. Citibank’s sale of 448 million new shares represented about 1.6% of the company’s 28.5 billion shares outstanding.
Although many investors are making short bets on Bank of America and Citi, two high-profile hedge fund managers, George Soros and John Paulson, have been building up long positions in both companies.
