Short interest in TD Bank (TD) stock has now grown to $6.1 billion, according to market data provider ORTEX.
Hedge fund bets that TD Bank’s stock will fall have increased by 45% in the past 14 days ago, ORTEX data shows.
The bets against TD stock have been prompted by the Canadian lender’s planned acquisition of U.S. regional bank First Horizon (FHN), which now looks in doubt following the collapse of several other U.S. regional lenders such as Silicon Valley Bank and Signature Bank.
Analysts and some shareholders have publicly called for TD to cancel the deal to buy First Horizon or renegotiate the terms in the wake of the U.S. banking turmoil.
TD has bid $13.4 billion U.S. for First Horizon and is awaiting regulatory approval of its takeover.
Arbitrage investors, many of whom are hedge funds, bet on mergers and acquisitions by buying shares of the target and shorting the acquirer’s stock.
Hedge funds profit when they borrow a stock from an investor and sell it back when the price drops, pocketing the difference. This is a widely used practice known as short-selling.
Around 5.5% of TD’s outstanding shares have now been sold short, according to ORTEX data.
TD Bank’s stock has fallen 12% over the last year to trade at $83.53 per share.