MILAN (Reuters) – Evotec rose abruptly on Tuesday amid market speculation that Melvin Capital Management was not retiring its positions in German drug dealer after some of their investments turned sour.
Evotec shares jumped 10% at one point on Tuesday with three traders saying the Melvin Capital-linked move appeared to be closing out its shorts after losses on GameStop and other investments.
Battery maker Varta rose for the same reason, a German-based trader said, while shares in Polish videogame company CD Projekt also saw strong demand. Over the last two sessions both Varta and CD Projekt shares have gone up nearly 20%.
Melvin Capital, founded in 2014 by Gabriel Plotkin, said it does not comment on positions and trade.
Governing films in Germany and Poland show that Melvin is currently in a short position of 6.2% in Evotec, of 4.35% in Varta and of 1.05% in CD Projekt.
Short sellers usually borrow and sell shares that they expect to fall, hoping to buy them back at a lower price, repay the loan and pocket the difference.
As of last Friday, nearly 70% of Evotec’s shares available for loan were already on loan, data from FIS Astec Analytics showed. Shares worth nearly $ 660 million were lent out – or nearly 13% of the company’s market capitalization.
Melvin said Monday it would receive a $ 2.75 billion investment from Citadel, the Chicago-based hedge fund managed by Ken Griffin, and billion-dollar investor Steven A. Cohen’s Point72 Asset Management.
The inflection is expected to help settle the hedge fund.
Reciting with Danilo Masoni; edited by Thyagaraju Adinarayan and Jane Merriman