The Lead: Twitter keeps growing, along with short interest
Twitter's Wall Street surge continued Thursday, with the San Francisco microblogging company closing at a record price for the fourth consecutive session even while the number of traders betting on a tumble from Twitter grew.
Twitter moved as high as $74.73 Thursday before closing with a 4.8 percent increase at $73.31, while the percentage of available shares targeted for short-selling reached 29 percent, according to Bloomberg correspondent Julie Hyman. The stock's recent rise has it closing in on Yahoo's (YHOO) market capitalization, the 10th-highest for Silicon Valley tech companies, while causing disbelief among observers.
Twitter had already been a target for short sellers, with the tactic -- which involves borrowing shares and selling them, hoping to repurchase at a lower price before returning the shares to their rightful owners -- growing 33 percent between the end of November and the middle of December, the latest reporting period.
"Demand to borrow Twitter is pretty heavy, with 69 percent of the shares that can be borrowed from lending programs being out on loan," Alex Brog, a director at options-tracking company Markit, told the Wall Street Journal. "That means it would be hard to short more of the company."
Twitter shares were originally made available for short sales and options trading in mid-November, but the stock price did not see major changes right away. In its first four weeks as a public company, Twitter stock closed lower than $40 or higher than $45 only once apiece, staying roughly in the range at which shares traded in their first day on Wall Street.
At the beginning of Twitter's fifth full week on the market, Dec. 9, the stock price swung nearly 10 percent higher, and has yet to stop -- in total, shares have gained 64.4 percent in less than three weeks. On the day shares began to swing, CNBC's Jim Cramer reported that an advisory firm had been pushing the idea of shorting the stock and explaining how to accomplish the trade.
With Twitter's shares continuing to climb higher, it stands to reason that more investors are checking in with a bet on the stock heading back down. However, Twitter has barely more than 10 percent of its available shares on the public market, as employees and early investors have not yet been granted the ability to sell their shares, and that small "float," as investors call it, could be factoring in to the elevated price.
"The float is only 11% of the total fully diluted outstanding shares, which we believe is creating a significant leveraging effect on the market value of the company," Wunderlich Securities analyst Blake Harper wrote in a note earlier this week, which also detailed the rising short interest of the company's stock.
With a small number of shares and a growing percentage used for short sales, stock prices can be volatile and not subject to typical fluctuation -- Tesla Motors (TSLA), for instance, has skyrocketed this year as investors have bet heavily against it, at times pushing short interest to more than a third of the available shares.
While Twitter's rise has been sharp enough to indicate larger forces at work than positive investor sentiment, other social-media companies have also been enjoying a strong end of 2013. Facebook dropped 0.4 percent to $57.73 Thursday, but has still gained 22.8 percent in December, when the Menlo Park company aimed to increase its public float with a secondary offering. Yelp has advanced 12.3 percent so far this month, while LinkedIn has stayed steady.
SV150 market report: Apple falls, Tesla increases as stocks gain
Wall Street moved higher Thursday, but Silicon Valley stocks barely budged and trailed the larger indexes as gains from smaller companies such as Twitter and Tesla were met with declines from Apple and eBay (EBAY).
Apple declined 0.7 percent to $563.90 despite the first holiday-shopping analytics showing more users shopping on Apple devices than tablets and smartphones using Google's (GOOG) Android mobile operating system; Google gained 0.5 percent to $1,117.46 after good news on Chromebook sales. The two companies also could face a patent battle, as Google filed suit against an Apple-led consortium that purchased a large patent portfolio from Canadian telecommunications company Nortel. The Wall Street Journal reported that Apple was fined by Taiwan and blocked from discussions with the country's wireless carriers after attempting to dictate the prices carriers charged for an iPhone.
Tesla stayed on the hot trail it began blazing Tuesday, when investors seemed to reward the Palo Alto electric car maker for receiving a renewed five-star safety rating from the same federal agency that is investigating fires in its Model S offering; Tesla stock gained 2.7 percent to $155.50 Thursday, its highest closing price since early November. eBay fell 2 percent after early returns from the holiday-shopping season showed Amazon experiencing much larger growth than the San Jose e-commerce giant, while Yahoo declined 0.5 percent to $40.65 despite good news on Alibaba. Oracle (ORCL) gained 1 percent to $37.69 even as investors seemed to bet on competition in the Redwood City software company's bid for San Bruno-based Responsys. Hewlett-Packard (HPQ) (up 0.5 percent to $28.31), Intel (INTC) (up 1.1 percent to $25.70) and Cisco (CSCO) (up 0.5 percent to $21.80) all gained as the storied Silicon Valley companies seek to plot out their next attacks.
The SV150 index of Silicon Valley's largest tech companies: Up 0.53, or 0.04 percent, to 1,504.91
The tech-heavy Nasdaq composite index: Up 11.76, or 0.28 percent. to 4,167.18
The blue chip Dow Jones industrial average: Up 122.33, or 0.75 percent, to 16,479.88
And the widely watched Standard & Poor's 500 index: Up 8.7, or 0.47 percent, to 1,842.02
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.