© Reuters. A general view of Pacific Western Bank in Huntington Beach, California, U.S., March 22, 2023. REUTERS/Mike Blake
(Reuters) – Short sellers made $378.9 million in paper profits betting against regional banks First Horizon (NYSE:) Corp, PacWest Bancorp and Western Alliance (NYSE:) Bancorp in Thursday’s session, analytics firm Ortex said.
Since the start of 2023, bearish investors have made $816 million from the three stocks alone, according to Ortex.
Shares of regional banks resumed their slide this week after the collapse of First Republic Bank (OTC:) – the third U.S. mid-sized lender to fail in two months – fueled fears there was more pain ahead for the sector.
PacWest Bancorp dove 57% on Thursday, dragging down other regional lenders, after the Los Angeles-based bank said it was in talks about strategic options.
Shares of First Horizon Corp slumped nearly 40% after its $13.4 billion takeover by Toronto-Dominion Bank Group was mutually called off because there was no clarity on when they would get regulatory approvals.
Western Alliance Bancorp denied a report from the Financial Times that said it was exploring a potential sale. The report had sent the lender’s shares down as much as 61.5% before trading was halted.
Over the first two days of May, short sellers made $1.2 billion from declines in stocks of U.S. regional lenders, according to Ortex.
The U.S. Securities and Exchange Commission is “not currently contemplating” a short-selling ban, an agency official told Reuters on Wednesday, as worries over bank soundness hit share prices.
Short sellers typically sell borrowed securities and aim to buy these back at a lower price to pocket the difference.
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