(Add data, Melvin comments, fund manager)
By Danilo Masoni
MILAN, Jan 27 (Reuters) - Drugmaker Evotec led
sweeping price swings in some of Europe's most shorted stocks on
Wednesday in an echo of the retail trading fever that has
gripped the United States.
The U.S. market moves have put piled pressure on
professional short sellers, who sell shares on the expectation
that they will fall and can be bought back more cheaply later.
Positions held by New York-based hedge fund Melvin Capital
Management, which has a 6.2% short on Evotec, have come under
particular scrutiny and shares in the drugmaker rose by 30% at
one point during the trading day in Frankfurt.
The fund led by Gabriel Plotkin is likely to have lost
millions of dollars on video game retailer GameStop
after a seven-fold rise in its shares.
Other heavily shorted stocks such as British publisher
Pearson, cinema chain Cineworld and commercial
property firm Unibail-Rodamco also saw their shares
spike, without any clear reason and no link to Melvin.
Battery maker Varta and Polish video game firm CD
Projekt, two Melvin shorts in Europe, also rose
strongly on Wednesday, further extending this week's gains.
The moves echo the frenzy surrounding GameStop where buying
by amateur investors has sent the stock sky-rocketing, leaving
short sellers 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,"
Banor SIM head of equities Angelo Meda said.
"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," Milan-based Meda added.
Evotec shares pared most of their initial gains but remained
highly volatile and by 1517 GMT the stock was up 4.4% on the
day, having already jumped 10% on Tuesday.
A spokesman said Melvin had closed out its GameStop
position. Melvin declined to comment on its European positions.
"Melvin Capital has repositioned our portfolio over the past
few days. We have closed out our position in GME (GameStop),"
the spokesman said in a statement.
Varta, in which Melvin has a 4.35% bearish bet, was up 5%
and CD Projekt added 6%. These stocks rose 14% and 20%
respectively in the previous two sessions.
Pearson gained 11%, Cineworld 9.5% and Unibail 10%.
"The need of some funds to cover the shorts combined with
the increasing weight of quantitative strategies, has created a
snowball effect," Michele Pedroni, senior portfolio manager at
Decalia in Geneva, said.
IHS Markit data shows Cineworld, Pearson, Evotec and Unibail
are among the top 12 most shorted stocks in Europe, with more
than 12% of their outstanding shares currently on loan.
Among other top-twelve top shorts are medical device maker
Ambu, whose shares also joined the rally, while oil
company Premier Oil, the most shorted stock in Europe
with 21% out of loan, escaped the trading frenzy.
(Reporting by Danilo Masoni; Editing by Thyagaraju Adinarayan,
Angus MacSwan and Alexander Smith)
