NEW YORK (
saw short interest fall in the second half of May, marking the second straight drop in shorting activity against the banking giant.
Shorting activity on Citigroup fell to 434 million shares at the end of May from 454 million through the first half of the month, and 482 million at the end of April. Short sellers borrow shares in the hope of buying them at a lower price in the future and pocketing the difference.
Citigroup is regularly the most actively-shorted ticker on the New York Stock Exchange, which is not surprising since the bank is nearly always the most actively-traded name on the long side as well.
Despite the falloff in negative bets against the stock, Citigroup shares lost ground in May along with the broader market as investor fears over a range of issues, from high levels of European debt, tougher regulations on financial services firms in the U.S. and geopolitical tensions over North Korea appeared to override earlier bullishness following a rebound in earnings. The negativity -- on both Citigroup and the broader market -- has continued in June following a weak U.S. jobs report last week.
Nonetheless, Citigroup has had its bright spots during the sell-off. It was
to "buy" from "neutral" by Goldman Sachs on May 24.
Goldman argued improving consumer credit trends and capital markets volatility were both positives for Citigroup and other big banks, but that Citigroup looked better on a price-to-normalized earnings basis than
, which it downgraded.
In a follow-up call with investors, Goldman analysts indicated
, and they cut Wells to make way for Citigroup.
Citigroup also got an upgrade to outperform on May 26 from Oppenheimer, where analyst Chris Kotowski made similar points and also argued that Citigroup's Latin American and Asian businesses "position it well for better than average growth in the coming years."
Citigroup has also gotten a couple of boosts from high profile hedge fund investor
. Ackman disclosed at an investor conference last month that his fund, known as Pershing Square, had bought 150 million shares of Citigroup, though he did not explain his investment thesis.
That explanation came in a
, which was published Tuesday and appeared to be the reason for the rise in Citigroup shares on strong volume on Wednesday. A big reason for Ackman's bullishness was Citigroup's $21 billion deferred tax asset, which gives the company insulation on the next $131 billion it earns, as
in a May 28 article
More on Citi Farley: Citigroup Stock Could Triple
Other banks that saw slight drops in short interest in the second half of May included
Bank of America
Regions Financial Corp.
, however, saw a slight uptick in short interest, to 30 million shares from 28 million during the first part of the month. The widely-followed financial sector ETF, the
Select Sector SPDR
saw short interest fall to 141 million shares, from roughly 149 million in the previous period.
Written by Dan Freed in New York