Europe's top shorted stocks soar on GameStop contagion
- Evotec surged as much as 30% in Frankfurt at one point as traders rushed into a stock where the US hedge fund headed by Gabriel Plotkin has built a 6.2% short position.
- Melvin is likely to have lost several million dollars on its bearish bets on GameStop after the US videogame retailer jumped seven-fold since mid January.
MILAN: Some of Europe's most shorted stocks saw huge price swings on Wednesday with drugmaker Evotec leading the pack on market chatter about Melvin Capital Management being forced to unwind its bearish bets after some of its investments turned sour.
Evotec surged as much as 30% in Frankfurt at one point as traders rushed into a stock where the US hedge fund headed by Gabriel Plotkin has built a 6.2% short position.
Melvin is likely to have lost several million dollars on its bearish bets on GameStop after the US videogame retailer jumped seven-fold since mid January.
Other heavily shorted stocks like publisher Pearson , cinema chain Cineworld and commercial property firm Unibail saw their shares spike, too, while battery maker Varta and video game firm CD Projekt - other two Melvin shorts - also rose strongly.
Their moves echoed the frenzy surrounding GameStop where amateur investors' buying has sent the stock sky-rocketing this week, leaving short sellers like Melvin scrambling to cover their positions.
"This is one of the extremes we're seeing these days on markets which are flooded by a huge mass of liquidity and where unprofessional investors are ready to jump_ in the deep end of the latest market trends," said Banor SIM head of equities Angelo Meda.
"Usually it doesn't last long but we don't really know. I don't rule out we could see other crazy things over the next few days," added Milan-based Meda.
Shares in Evotec on Tuesday later pared most of their gains but remained highly volatile. By 1117 GMT the stock was up 1.1% on the day, having already jumped 10% on Tuesday.
A German trader said Evotec's spike in was linked to speculation on online forum Reddit about troubles at the hedge fund, which earlier this month agreed on a $2.75 cash infusion that is expected to help stabilise its finances.
Varta, in which Melvin has a 4.35% bearish bet, was last up 1.3% and CD Projekt added up 6%. Pearson gained 9.7%, Cineworld surged 13% and Unibail was up 14%.
Short sellers typically bet against stocks of companies that they view as outdated in their business models or otherwise overvalued.
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