Amid the benchmark equity indexes posting a soft performance amid choppy waters, the regional banking sector conspicuously scored huge gains. In particular, cryptocurrency-friendly financial firm Silvergate Capital (US:SI) shot up over 17% in late afternoon trading on Monday, buoyed by First Citizens BancShares (US:FCNCA) agreeing to buy failed lender Silicon Valley Bank (US:SIVB) at a discount.
According to The New York Times, the acquisition clears the way for the U.S. banking industry to potentially move forward from the chaos associated with the failure of Silicon Valley and Signature Bank (US:SBNY). NYT reported that First Citizens will effectively buy the former firm’s retail operations, including the 17 branches, deposits and loans that the Federal Deposit Insurance Corporation (FDIC) placed under its control.
Further, the newspaper added that the deal “…will give First Citizens about $56 billion in deposits, as well as $72 billion in assets at a $16.5 billion discount. The F.D.I.C. expects its deposit insurance fund to take a roughly $20 billion hit, though the regulator will gain equity appreciation rights in First Citizen worth up to $500 million. The two sides will share losses and potential recoveries on Silicon Valley Bank’s commercial loans.”
Gapped Up
With the jolt of confidence, SI stock gapped up from Friday’s closing price on strong volume. Adding to the enthusiasm, La Jolla, California-based Silvergate may attract speculative interest as a possible short-squeeze opportunity.
According to data compiled by Fintel, Silvergate’s short interest hit 71.64% of its float, making it one of the most shorted securities across recent trading sessions. Further, SI stock showed 91.19 on Fintel’s proprietary Short Squeeze Score. The scoring model uses a combination of short interest, float, short borrow fee rates, and other metrics. The number ranges from 0 to 100, with higher numbers indicating a higher risk of a short squeeze relative to its peers, and 50 being the average.
In addition, on Fintel’s Short Squeeze Leaderboard, SI stock comes in at number 25 out of 250 of the most bearishly targeted equity shares. However, prospective traders should be aware that the current ranking represents a decline of nine places against the prior week.
Shorts Fall
To be sure, the data shows there are only 55,000 shares available to be shorted at a leading prime brokerage. This figure does not represent the total number of shares available to short. Also, it doesn’t include data from other brokers or dark pools.
Rather, it’s useful for tracking the rise and fall in demand for the underlying securities. In that respect, it’s worth noting that prior to start of the March 27 session, the short shares availability stood at 700,000. However, as of the most recent count from the time of writing, this stat fell to only 55,000 shares.
This story originally appeared on Fintel.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
