The most shorted life science stocks in the Nordics

Short selling – i.e. when investors borrow shares to sell and hope to buy them back at a lower price before returning them – is a bet that the price will fall. If an investor believes that the share price will fall, short selling is a way to make money on the decline in price. If several investors choose to short a share, it may be a sign that something is wrong.

While it should be seen as a warning flag when a company has a high percentage of shorted shares, it does not automatically mean that the stock will fall. Many of us remember the hysterical movements in the American gambling retailer GameStop in early 2021, where short sellers were forced to buy back shares at huge losses in a so-called “short squeeze”.

Large short positions in life science

Blanking is also common in the life science sphere. The radiation therapy system supplier Elekta has been one of the most short-listed stocks in the Nordic region for several years. According to the database Holdings Just over 11 percent of the company's shares are short-listed at the time of writing. Only one other Nordic stock beats that; the stock market collapsed SBB.

Looking at the price development over the past five years, the short sellers have also been proven right. Elekta has lost almost half of its value over the same period and has thus significantly underperformed the rest of the stock market. With today's total short position worth almost SEK 3 billion, it is clear that there are clear expectations that the share will continue to decline.

As is often the case, however, there are divided opinions about the future price development. For example, Handelsbanken recently published an analysis describing Elekta as a potential takeover candidate. If that prediction comes true, the short-listed companies will instead get a real slap on the nose.

Juicy valuation weighs

Next in the short-selling top in the life science sphere we find Danish ChemoMetec, with around 9,5 percent of shares shorted. The company sells medical equipment for cell counting and has enjoyed great success for many years, after which investors have been spoiled with fine growth figures year after year. This has in turn driven up the share price, which peaked at over 1000 Danish kroner four years ago.

However, that suit turned out to be too big. At its peak, the PE ratio – the ratio between profit and share price (price/earnings) – was almost 200, a juicy valuation to say the least. The share price has since corrected and when ChemoMetec reported its broken financial year 2023/2024, sales had fallen by 8 percent. As a result, there are those who think that even today's PE ratio of just over 50 is a bit high, and if the short sellers are to be believed, further price declines are expected in the future.

Blankare has repurchased Dicot

A stock that is currently not on the list, but is still worth mentioning, is the potency drug developer DicotThe stock recently fell out of the top three list after the big loser Guevoura Fund started to buy back shares and reduce its position.

The buybacks began after Dicot successfully completed a rights issue. It can be assumed that the short sellers had their sights set on the subscription price in the issue, which was SEK 0,15 per share. The share was low and fluctuating around SEK 0,20 while the short position was built up and is currently trading at just over SEK 0,16.

The great interest in the capital raising led to Dicot being able to raise more money than initially targeted. With almost 135 million SEK in fresh capital, the company can increase the pace of development and the other day it was announced that it also plans to expand to additional indications.

BioArctic is being pressed

Finally, we would like to mention BioArctic, which has been on many people's lips due to the success of Alzheimer's treatment LecanemabThe stock has been volatile since Phase III data was announced in 2022, with hopes of future sales success struggling with a high valuation.

Another blow came this summer when the EU's Committee for Medicinal Products for Human Use, CHMP, gave a negative recommendation regarding marketing authorization. The announcement has put extra pressure on the share and was followed by lowered target prices from several analysts – a blow to those short sellers who had bet on weak development. Currently, just over 4 percent of the company's shares are shorted.

List of the most shorted life science stocks

As previously noted, however, it cannot be assumed that a high proportion of short-listed shares will automatically result in price declines. At the same time, short-sellers rarely take their short positions lightly, so there may be reason to be cautious about stocks to which they flock.

Below, BioStock lists the ten most shorted life science stocks right now.