of its acquisition of West One Bancorp, which is due to be completed by yearend. As of Nov. 15, nearly 9.6 million shares were sold short. That amounts to nearly 10% of the Portland-based banking company's 98.4 million shares outstanding at the end of the third quarter. Shorting a stock traditionally involves selling borrowed shares on the prospect that the stock will slip in value and the borrowed shares can be repayed profitably with cheaper ones. But analysts said the rising short position in U.S. Bancorp stems from short-selling by market players attempting to lock in gains based on the share-exchange ratios in bank acquisition agreements. U.S. Bancorp's short interest, the aggregate short sales of its stock, is up 18.5% from a month ago and about 1,450% from April, before the West One deal was announced. Overall, short interest in banks and banking-related companies traded on Nasdaq fell 0.5% to 50.5 million shares during the month ended Nov. 15, according to data from the National Association of Securities Dealers. (See table on page 22.) Several banking industry analysts following U.S. Bancorp said they believe the large short position in the company can be ascribed to merger- related arbitrage. "As you get closer to the end of the acquisition process, more and more arbitragers are willing to make a bet," said R. Jay Tejera, a banking industry analyst in Seattle for Dain, Bosworth & Co. "This deal has held a lot of interest for the arbitragers," Mr. Tejera noted. "Both the companies trade on Nasdaq, where the spreads tend to be somewhat wider than for listed stocks" on the New York Stock Exchange. Also, the parameters for short interest activity are somewhat less restrictive for Nasdaq-traded companies than for those on the New York or American stock exchanges. "My view is that this is mostly arb-generated short activity in the stock," said analyst Frank J. Barkocy of Advest Inc. While some analysts have criticized the West One deal and said they expect U.S. Bancorp's results to suffer, Mr. Tejera said he knew of "no time bombs or negatives, including credit-related ones, that would account for short-selling."

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