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Investors who wager shares in a company will fall were increasing bets on First Republic's stock when it was already taking a beating, making it difficult for the bank to recover its value, according to the source.

Martin, who shorted SVB in January 2023; Nate Koppikar of Orso Partners, who shorted SVB in early 2021; Barry Norris of Argonaut Capital Partners, who shorted SVB in late 2022; John Hempton of Bronte Capital Management, who shorted Signature in late 2021; and Marc Cohodes, who shorted Silvergate Bank in November 2022, according to interviews with Reuters.

Regardless, short positions in most regional banks were nowhere near some highly shorted stocks like electric carmaker Tesla Inc, which hit around 25% as recently as 2019, and GameStop Corp, which surged past 100% of shares in 2020, according to Refinitiv data.

As the crisis accelerated, JPMorgan Chase & Co equity analysts wrote on March 17 that short-sellers were "working collectively to drive runs on banks," and venture capitalist David Sacks asked on Twitter whether "scurrilous short sellers" had used social media to exacerbate depositor flight from SVB.

Two of the banks that shut down last month, Silicon Valley Bank (SVB) and Signature Bank, showed a similar pattern: short interest increased as their stock started to fall, at varying degrees of intensity.

The percent of shares borrowed -- the basic mechanism of a short bet -- was minimal to start the month but increased to between 7% and 37% by March 31, according to various data provider calculations, versus averages between 3% and 5% across all stocks.

Porter Collins, co-founder of hedge fund manager Seawolf Capital, said he saw how rising interest rates would likely hit banks and, in early 2022, shorted SVB, Signature, First Republic, Silvergate and Charles Schwab Corp..

The crisis of confidence in U.S. regional banks started when shares of SVB plunged and depositors fled after it announced plans on March 8 to raise capital to fill a nearly $2 billion hole from the sale of securities.

Some lenders were also challenged by exposure to cryptocurrency and technology companies. The underlying issues exploded last month when depositor flight spiraled out of control and regional lenders across the board saw their shares hit. regional banks grew last year, as rapidly rising interest rates slashed the value of some banks' holdings in long-term assets such as home loans and government bonds.

Data from S&P Global Market Intelligence and ORTEX, who use different methodologies, have similar numbers showing SVB, First Republic and Signature with relatively low overall short levels before the crisis.

April 9 (Reuters) - As First Republic Bank's share price fell by double-digits in the aftermath of the collapse of Silicon Valley Bank last month, some people close to the San Francisco-based lender were worried short sellers were exacerbating its travails, according to a source familiar with the situation.

That compares to an average of about 4.65% across all stocks, per S3. Shorts represented only about 5% of SVB's stock float as of March 1, according to data tracker S3 Partners, with First Republic at around 3% and Signature at 6%.

An exception was Silvergate, a cryptocurrency-focused lender, which for months faced an unusually high level of short interest compared to other banks - above 75% by the time it said it would wind down operations on March 8.

"The shorts in the months before the collapse were accurately warning the markets...that the bank (SVB) was being dangerously mismanaged," Dennis Kelleher, President and CEO of Better Markets, a nonprofit industry group in Washington, DC, said in an email.

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