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Short sellers target Bank of California amid SEC probe
25 January 2017
Demand to borrow bank's shares rising according to data from Interactive Brokers
Short sellers are upping their bets against Bank of
California after the San-Francisco-based lender lost its chief
executive this week and revealed it is under investigation by
Data from Interactive Brokers' securities lending desk shows
fees to borrow shares have increased from 1% to 1.5% and short
interest (the quantity of stock investors have
sold short) now stands at
Shares in the NYSE-listed bank have been under pressure
since October following reports of bank
executives’ ties to a controversial financier.
The SEC is now demanding information related to a Bank of
California press release responding to allegations
of ties between the bank’s leadership and
Jason Galanis, an LA financier who pleaded guilty to
securities fraud charges over the summer.
Steven Sugarman, who helped recapitalize Bank of California
in 2010, resigned as chief executive on Monday.
Meanwhile, Legion Partners, a Beverly Hills-based asset
manager, has bought a 6.3% stake in the lender.
The 13D filing also included a letter where Legion calls
into question Bank of California's corporate governance and
urged the company to consider strategic alternatives.
"Shares are still available from lenders large and small but
less than we have seen prior to this week’s
events," securities lending analysts at Interactive Data wrote
"We believe this story will continue unfolding, affecting
borrow fees in the process."