As First Republic Bank's share price fell by double-digits in the aftermath of the collapse of Silicon Valley Bank last month, some people close to the San Francisco-based lender were worried short sellers were exacerbating its travails, according to a source familiar with the situation.
, showed a similar pattern: short interest increased as their stock started to fall, at varying degrees of intensity.
"The shorts in the months before the collapse were accurately warning the markets...that the bank was being dangerously mismanaged," Dennis Kelleher, President and CEO of Better Markets, a nonprofit industry group in Washington, DC, said in an email. "The problem is once that collapse happened, shorts with various motives started targeting other banks."
First Republic and Chanos declined to comment. Signature and SVB did not respond to requests for comment.Short selling is a controversial practice, blamed in the financial crisis of 2008 for adding to the pain; it was temporarily banned, albeit with little impact. Somewere later celebrated as making prophetic calls about the U.S. housing market.
These included: William C.
Regardless, short positions in most regional banks were nowhere near some highly shorted stocks like electric carmaker Tesla Inc, which hit around 25% as recently as 2019, and GameStop Corp, which surged past 100% of shares in 2020, according to Refinitiv data.
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