Short selling data can play a valuable role in risk management. Generally speaking, short sellers are sophisticated, high-conviction traders that do their research. If they’re targeting a specific stock, it can pay to approach that security with caution.
In this report, we are going to highlight some bearish short selling activity at CureVac NV (CVAC:US). CureVac is a German biopharmaceutical company that is pioneering the development of a completely new class of drugs based on messenger RNA (mRNA) technology. Recently, the company has been working on the development of a Covid-19 vaccine. It is listed on the NASDAQ Global Market as well as the Frankfurt Stock Exchange and currently has a market capitalization of $10.80 billion.
CureVac: Short Selling Activity
An analysis of the short selling data on CureVac reveals several red flags. The first is that short interest is very high. Currently, around 3.7 million CVAC shares are on loan. That represents about 25% of the free float.
The second is that the cost to borrow the stock is very high. At present, the cost to borrow stock is 54.3%. This tells us that demand for the stock from short sellers is intense right now. Overall, CVAC has a high Borrowing Activity Rating (BAR) of 10. The BAR includes inputs from outstanding loan fees, new loan fees, new loan volume, and utilization rates.
Poor Covid-19 Vaccine Results
CureVac stock fell around 45% on 17 June after the company announced that preliminary data showed that its Covid-19 vaccine, CVnCoV, was only 47% effective in preventing symptomatic disease. The disappointing trial results fell just short of the threshold set out by the World Health Organization (WHO) for vaccines.
CureVac's Covid-19 vaccine trials, which were conducted in conjunction with Bayer, involved more than 40,000 people and took place across ten countries in Europe and Latin America. New variants of Covid-19 proved to be a problem. In total, 134 Covid-19 cases were assessed in the analysis. Out of these cases, 124 were sequenced to identify the variant causing the infection. Only one single case was attributable to the original SARS-CoV-2 virus.
It seems that short sellers were expecting these poor vaccine trial results. We can see that from mid-April, the number of transactions on the short side increased significantly. Many short sellers will have generated significant profits from CureVac’s huge share price decline.
Looking at the short selling data on CureVac, we think caution is still warranted towards the stock. The high level of short interest indicates that there could be further downside here.