Novavax’s record one-day rally has forced some short sellers who had bet on the stock to exit their positions at a loss.
The company’s stock price soared 99% on Friday. signed The $1.2 billion licensing agreement with Sanofi includes the commercialization of a combined COVID-19 and influenza vaccine. The move would boost the stock, which was down about 99% from its 2021 peak before trading. decline in demand For the new coronavirus vaccine.
But Friday’s surge cost short sellers about $255 million in paper losses, according to data from S3 Partners LLC. Biotech stocks are a crowded position for short sellers, with less than 1 million shares available to borrow to support new sales, according to S3.
Novavax’s rapid rise in stock has put traders at risk of being squeezed, forcing short sellers to buy back shares to eliminate losing positions. Short covering drives up the company’s stock price, putting more pressure on contrarian traders.
“We expect a heart-breaking short squeeze in Novavax as short sellers incur huge losses at the market open and close out their positions,” said Ihor Dusaniowski, managing director of predictive analytics at S3. said.
Novavax is one of the most heavily shorted stocks in the U.S., with more than $50 million worth of short interest.
“Many short sellers may hold out for a while and look for a more favorable exit price in the coming days,” Dusaniowski added.
Novavax, for its part, will receive an upfront payment of $500 million and up to $700 million if development, regulatory and commercialization milestones are achieved under the Sanofi license agreement. The new cash injection prompted JPMorgan’s Eric Joseph to call the deal “transformative for Novavax’s entire business” and prompt an upgrade.
Joseph, who moved his rating from underweight to neutral, believes that many of the commercial growing pains experienced by Novavax in 2023 and 2024 will not be a significant factor as Sanofi executes commercialization beyond 2025. Expect.
Wall Street analysts remain divided on the stock, with three rated it buy, three rated it hold, and none recommending investors sell, according to data compiled by Bloomberg. The average price target of $17 implies an upside of approximately 91% over the next 12 months from where the stock is currently trading.
