By Munsif Vengattil
(Reuters) - Shares of Palantir Technologies Inc were on track for their worst day on Wednesday, extending a four-day losing streak and wiping off some gains from a stunning rally that had seen the stock more than triple in value since its September debut.
Shares of the U.S. data analytics firm, known for its work with the Central Intelligence Agency and other government agencies, tumbled as much as 17.6% to $21.15 in heavy volumes.
Investors have exchanged $3.9 billion worth of the shares per day on average in the past five days, making Palantir Wall Street's 11th most traded company over the period, according to Refinitiv data.
Short bets reached a record 8.2% of Palantir's float on Wednesday, according to data analytics firm S3 Partners. Such bets peaked at $1.6 billion on Friday, the day Citron Research went short on the stock, calling it "a full casino".
"We should expect more short selling in PLTR as existing shorts continue to build their positions and new shorts smell blood in the water and join the fray," said Ihor Dusaniwsky, managing director of predictive analytics at S3.
Morgan Stanley, one of the lead financial advisers on Palantir's direct listing, downgraded the stock to "underweight" from "equal-weight" on Wednesday, citing an over-priced valuation compared to its software peers.
"We believe much of incremental move since third quarter results are likely related to factors outside of fundamentals, including strong retail long-interest squeezing strong institutional short-interest," Morgan Stanley analyst Keith Weiss wrote.
Palantir, currently valued at over $39 billion, for the most part of last month traded in the black, soaring 167%.
In November, Palantir beat market expectations for sales and profit in its first quarter as a public company and raised its 2020 revenue forecast, boosted by large government and aerospace contracts.
(Reporting by Munsif Vengattil, Subrat Patnaik and Noel Randewich in San Francisco; Editing by Shinjini Ganguli)