Short Sellers Hit Internet Stocks

For the two weeks that ended on May 15, short sellers hit old and new Internet site companies alike.

Among firms that had IPOs recently, the short interest in Zynga (NASDAQ: ZNGA) rose 35% to 56.6 million. Shares sold short in Groupon (NASDAQ: GRPN) rose 19% to 20.7 million. Both companies have been under attack because many investors believe that they cannot sustain sales in a market in which the number of competitors is multiplying quickly.

Among Web 1.0 firms, the short interest in Yahoo! (NASDAQ: YHOO) was up 23% to 25.6 million. Although the firm has been able to make progress with its Asian assets, its core portal business is in trouble, and it recently replaced another CEO. Shares short in eBay (NASDAQ: EBAY) rose 19% to 16.6 million.

Among other tech stocks, the short interest in Microsoft (NASDAQ: MSFT), which continues to struggle in the critical mobile industry, rose 25% to 87 million. Shares sold short in badly wounded Research In Motion (NASDAQ: RIMM) rose 18% to 53.4 million. The short interest in Oracle (NASDAQ: ORCL) rose 8% to 35.4 million shares.

Other companies with weak prospects hit by short sellers included Chesapeake Energy (NYSE: CHK); shares sold short rose 27% to 85.2 million. There are questions about the CEO’s practice of investing individually in some of the firm’s drilling projects. Shares short in Sprint-Nextel (NYSE: S) rose 20% to 116.7 million. The third-largest wireless company continues to lose ground to AT&T (NYSE: T) and Verizon Wireless.

Short interest in major banks also rose as worries about Europe’s finances and new regulations pushed share prices down. Shares sold short in Bank of America (NYSE: BAC) rose 6% to 150.7 million. The short interest in Citigroup (NYSE: C) rose 16% to 35.5 million. Shares sold short in Wells Fargo (NYSE: WFC) moved higher by 11% to 36 million.

Douglas A. McIntyre