The Cost to Borrow Troika (TRKA) Stock Has More Than Doubled in 2023
All eyes are on Troika Media Group (NASDAQ:TRKA), as the cost to borrow (CTB) shares of TRKA stock has more than doubled since Feb. 17. Today, the CTB fee sits at 130.94%. The Street notes that the average CTB fee for a stock ranges between 0….
All eyes are on Troika Media Group (NASDAQ:TRKA), as the cost to borrow (CTB) shares of TRKA stock has more than doubled since Feb. 17. Today, the CTB fee sits at 130.94%. The Street notes that the average CTB fee for a stock ranges between 0.3% and 3%.
CTB signifies the yearly rate that short sellers must pay to borrow shares. The rate rises when short seller demand is high and falls when short seller demand is low. In addition, a high CTB fee can also reflect a scarcity of available short shares.
On the other hand, a high CTB fee could also be perceived as a positive for shareholders. Let’s get into the details.
Cost to Borrow Fee for TRKA Soars Higher
Paying 130.94% to borrow short shares seems excessively high. As a result, the high fee may influence short sellers to cover their positions by buying shares of the underlying stock. A high CTB fee also affects a trader’s risk/reward model and lowers the chances of selling for a profit.
As of Feb. 15, there were 12.89 million shares of TRKA sold short with a value of $3.08 million. That’s equivalent to a short interest as a percentage of float of 36.3%. The short interest figure increased 87.4% compared to the reading on Jan. 31. In general, a short interest above 10% is considered high, while a short interest above 20% is considered exceptionally high.
Today, TRKA stock is up by 15%, which may reflect short seller capitulation due to a high CTB fee. Since the beginning of the year, TRKA is up by nearly 380%. The run up in price was supported by an announcement that Troika would withdraw a registration statement that detailed the resale of up to 272.76 million shares of common stock from selling stockholders. The company has not made any further announcements since then.
Specifically, the resale sought to issue 266.76 million shares upon the exercise of 33.33 million warrants warrants. Another six million shares could have been issued to Troika’s placement agent and/or its assignees upon the exercise of 1 million warrants. With the withdrawal of the resale, Troika may have missed out on $68 million in gross proceeds, but escaped dilution in the process.
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On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.
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