Craft website Etsy likely attracting more short sellers

By Noel Randewich SAN FRANCISCO (Reuters) - Etsy Inc appears to have attracted more investors in the past week betting that the craft shopping website's share price will fall, even as a mention from a Google Inc executive last Friday sent its stock soaring 31 percent in one session. The annual interest rate short sellers pay to borrow shares of Etsy doubled last week to 48 percent, according to SunGard's Astec Analytics, which tracks securities lending. The interest rate tends to rise in line with demand from short-sellers, who borrow and sell stocks they think will fall in value, hoping to make a profit by buying the stock back more cheaply later on. A significant percentage of stock in a short position indicates that investors expect a stock to drop in value. It follows a gradual increase in the percentage of Etsy's outstanding shares sold short since the Brooklyn-based company's initial public offering in April to 8.1 percent at the end of June, the most recent data available, according to Thomson Reuters data. Options activity over the last two weeks has also signaled investors expect Etsy's stock to fall. On Thursday, there were 1.5 open options to sell Etsy stock for each open option to buy, the highest the ratio has been since the options began trading in April. Founded in 2005, Etsy has expanded from hand-made crafts to vintage goods and more recently, select mass-manufactured products. The appearance of some counterfeit products on Etsy as well as a plan by online commerce giant Amazon.com Inc to launch its own rival "Handmade" marketplace are seen by some on Wall Street as risks. Wall Street firms Goldman Sachs and Morgan Stanley, which managed Etsy's IPO, in May initiated analyst coverage of the company with "neutral" ratings. Last Friday, its stock surged more than 30 percent in one day after an executive on Google's quarterly conference call with Wall Street analysts pointed to Etsy as a good example of web companies winning more business due to increased data indexing by Google. On Thursday, Etsy's stock was down 0.3 percent at $18.40, bringing its decline since last Friday's surge to 16 percent. (Reporting by Noel Randewich in San Francisco, additional reporting by Saqib Ahmed in New York; Editing by Bill Rigby)