Shares of PacWest Bancorp (NASDAQ:PACW) fell nearly 3% on Wednesday, reversing course from premarket, as debt ceiling talks impasse overshadowed optimism around the U.S. mid-sized lender’s sale of its property lending unit to bolster its balance sheet. Investors have been on edge as the deadline to raise the government’s $31.4 trillion borrowing limit looms, with President Joe Biden’s administration and congressional Republicans having failed to reach an agreement so far.
PacWest on Tuesday agreed to offload its property lending unit for an undisclosed amount to real estate financing firm Roc360, a day after the sale of $2.6 billion worth of real estate construction loans at a discount. The stock had nearly tripled in value to close at $7.38 on Tuesday since hitting a record low on May 4 on a report that the Los Angeles-based bank was exploring strategic alternatives.
Analysts have signaled it would not take much good news for the sector to see a short squeeze. Meanwhile, investors are also betting that the worst of the crisis is over and that many lenders are fundamentally sound. So far this week, short sellers have lost a combined $98.5 million betting against shares of PacWest, Western Alliance (NYSE:WAL) Bancorp, Fifth Third Bancorp (NASDAQ:FITB) and Comerica (NYSE:CMA) Inc, according to data from analytics firm Ortex.