Shorting SNAP

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Submitted by gzz on May 23, 2019 - 6:01pm

Logged on a few days ago to short snap, uber, and lyft. Uber and lyft no shares were available to short. I stopped checking since this doesn’t look to change anytime soon. Snap had plenty of shares to short and no interest charge.

All three companies have scary income statements.

Snap is losing money hand over fist, but doesn’t have the excuse of rapid growth anymore. User base is flat, declining slightly in North America. They can keep trying to monetize their users with more and more ads, but seems like a vicious cycle to me, people will only tolerate so many video ads. And the overall background is declining online ad rates. And then their biggest competition is facebook owned instagram!

I actually shorted SNAP after its IPO for similar reasons and got out (for a nice profit) when they started charging 18% interest to short it.

Submitted by gzz on May 31, 2019 - 12:35pm.

Uber can now be easily shorted.

Their quarterly report shows weak rideshare revenue growth and their largest loss from operations ever.

Good enough for me to short.

The only bright spot I saw was Uber Eats, but it is still small and lots of competition.

Loss from operations just in Q1 was a record 1.03B. Total losses since founding of 8.87B.

I do like the company, but the stock at $40 per share and $67 bil market cap seems crazy to me.

I shorted today half of what would be the largest position I am comfortable with. Will add to the position if it hits $44.

Submitted by HLS on June 3, 2019 - 10:09pm.

Take a look at buying In The Money (ITM) puts.
Your risk is limited to what you pay for the puts, and can be at a tiny premium to shorting (borrowing)shares to short.

When you short a stock you have huge unlimited risk on the (even if small) chance that someone comes along and takes the company private at a premium to the market price.
Crazier things have happened!

Submitted by barnaby33 on June 5, 2019 - 12:46pm.

I was thinking the same thing HLS. However puts are also dangerous because you have to get timing and direction correct, unless you are going to get into really advanced strategies. A basic grasp of "Black-scholes" is necessary.

Submitted by flu on June 5, 2019 - 2:12pm.

The markets can stay irrational longer than you can stay solvent.

Submitted by gzz on June 6, 2019 - 1:17pm.

Up 15% since I first shorted.

This is why I start short positions gingerly!

Longer than I can stay solvent? Sometimes, but not with the cash burn rates of Uber and Snap.

Uber just went back to the “hard/impossible to short” list, so a lot of people see this as a no-brainer short. I believe Uber has lost more money than any startup in history at about $9-10 billion thus far.

Submitted by gzz on June 6, 2019 - 4:01pm.

In my defense, I also have been plugging build america bond funds, BBN and GBAB. They’ve gone up 15-20% since Fall 2018, plus paid their fat 6.5% monthly dividends the whole time.

I’d call them a hold rather than a buy after such a run-up.

I don’t play with puts since I can handle the downside of short sales, and also option premium kills so much of the gains. Plus option bid-ask spreads are huge compared to stocks.

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