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Jul 17, 2020

Moderna's 370% rally has cost short-sellers US$1.5 billion in 2020

There will be multiple winners in the vaccine race: Piper Sandler & Co.

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Those betting against high-flying vaccine developer Moderna Inc. have taken their lumps this year with the biotech’s 370-per-cent rally costing short sellers almost US$1.5 billion, according to financial analytics firm S3 Partners.

The Cambridge, Massachusetts-based biotech has boomed into a US$36-billion behemoth amid excitement for its vaccine to treat the novel coronavirus. Still, even with the stock’s parabolic move this week, it’s primed for a squeeze with short investor losses potentially outweighing overbought price conviction, S3 Partners managing director Ihor Dusaniwsky said in a note.

Moderna surged 6.9 per cent to a record on Wednesday after early results from its COVID-19 vaccine candidate drew Wall Street praise. With the company set to start a final-stage study of the vaccine this month, excitement for the company and nerves for short sellers could push the stock even higher.

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“There is (US)$2.4 billion of buy-to-cover dry powder in this stock, once shorts begin to cover in size the buying pressure will jolt the stock price suddenly higher,” Dusaniwsky wrote Friday. Roughly 10 per cent of Moderna shares available for trading are currently sold short, according to data compiled by S3 Partners.

The biotech’s 13-per-cent rally Friday, alongside peers, fueled it to a new record ahead of detailed results from a trial of AstraZeneca Plc and University of Oxford’s vaccine that are expected Monday. Moderna’s current five-day winning streak which has seen the stock jump by more than 50 per cent is its best such move since April.

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