Short Selling

Short Selling Report: McPhy Energy SAS (MCPHY:FP)

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McPhy Energy SAS
MCPHY:FP
12 months:
+62%
Activity:
Bearish
Pattern:
High short interest
News:
Profit warning
McPhy Energy SAS
MCPHY:FP
12 months:
+62%
Activity:
Bearish
Pattern:
High short interest
News:
Profit warning

If a stock has a high level of short interest, it can pay to approach the security with caution. Short sellers tend to be well-informed, high-conviction traders. If they’re shorting a stock, there’s usually a good reason they are doing so.

In this report, we are going to discuss the short interest data on McPhy Energy SAS (MCPHY:FP). McPhy Energy is a French renewable energy company that develops hydrogen storage and production solutions for the merchant hydrogen market and renewable energy markets. Its goal is to help customers in the industrial, mobility, and energy sectors successfully transition to zero-carbon business models. The company is listed on the Euronext Paris stock exchange and currently has a market capitalization of €578 million.

McPhy Energy: Short Selling Data

Our data shows that McPhy Energy is currently the second-most shorted stock in France and the fourth-most shorted stock in Europe. At present, 2.08 million MCPHY shares are on loan, which equates to short interest of 7.51%. The total value of the shares on loan is approximately €45.25 million.

Marshall Wace LLP holds the largest position with 351,804 shares or 1.26% of the total shares outstanding, down from the peak of 1.70% on 19th April 2021.

Significant Increase In Short Interest

What stands out about the short interest at McPhy is that it has increased significantly in recent months. At the start of 2021, just 144,660 were on loan, which equated to short interest of a low 0.52%. This means that year to date, short interest has increased by over 1,300%. This is concerning. Studies on short interest have found that sharp increases in short interest tend to be followed by a period of negative abnormal returns.

It’s worth noting that this increase in short interest has coincided with a decline in the share price. Since the start of the year, McPhy’s share price has fallen from €40.25 to €21.66 – a decline of 46%. As a result of this share price fall, over €500 million has been wiped from the company’s market capitalization.

Despite the decline in the share price, four out of nine short sellers increased their short positions between 18th June and 24th June. In total, an additional 484,055 shares worth €10.4 million were shorted. This indicates that the short sellers still believe the stock is overvalued.

Profit Warning

Earlier this month, McPhy Energy issued a profit warning. The group advised that due to delays in the execution of its projects, as well as in the taking of firm orders, which have been slow to materialize due to Covid-19 and the ‘wait-and-see’ attitude of companies dependent on public financing, revenue growth for the full year 2021 could be limited. It now expects revenue for the first half of 2021 to be ‘above €5 million’, compared to €5.4 million in the same period last year.

Since this profit warning, a number of brokers have reduced their price targets for McPhy. Barclays, for example, has cut its target price to €41 from €49. Berenberg, meanwhile, has cut the stock from ‘buy’ to ‘hold’ and reduced its price target to €30 from €35.

In light of these developments, we see the high level of short interest here as a bearish indicator. It suggests that short sellers expect the stock to fall from here.

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