May 4 (Reuters) – Short sellers made $378.9 million in paper profits betting against regional banks First Horizon Corp (FHN.N), PacWest Bancorp (PACW.O) and Western Alliance Bancorp (WAL.N) 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 – the third U.S. mid-sized lender to fail in two months – fueled fears there was more pain ahead for the sector.
PacWest Bancorp (PACW.O) 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 (FHN.N) slumped nearly 40% after its $13.4 billion takeover by Toronto-Dominion Bank Group (TD.TO) was mutually called off because there was no clarity on when they would get regulatory approvals.
Western Alliance Bancorp (WAL.N) 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.
Reporting by Medha Singh in Bengaluru; Editing by Devika Syamnath