Hedge funds betting on the fall of share prices could find themselves squeezed on both sides of the Atlantic as stocks of European companies that speculative investors had levied large bets against rallied Wednesday.
Melvin Capital Management has bet against more than 6% of German pharmaceutical company Evotec SE’s shares, according to filings with European regulators.
The stock rallied 9.6% Wednesday. Such a run could put pressure on Melvin and other hedge funds to cover their positions, known as a “short squeeze.” Melvin has also bet against Polish games developer CD Projekt SA, which gained 5.3%, according to FactSet.
Earlier this week, Melvin received an emergency influx of cash after betting against GameStop Corp., the stock pushed higher by individual investors on Reddit forum Wall Street Bets.
Retail trading is less exuberant in Europe than the U.S., suggesting it played less of a role than in forcing up stocks like GameStop, analysts said. Still, they said the large moves in heavily shorted stocks suggested hedge funds were unwinding bets that their price would fall.
Shares of U.K. publisher Pearson PLC, which last week said sales dropped 10% in 2020, shot up 14%. Funds that had wagered against the stock include Marshall Wace LLP and D1 Capital Partners LP, according to data from the U.K.’s Financial Conduct Authority.
Melvin and Marshall Wace declined to comment. D1 Capital Partners did not immediately return a request for comment.
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January 28, 2021 at 12:53AM
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