Ann: CLINUVEL Newsletter, page-20

I don't really want to write about short selling of Clinuvel, I would rather be discussing it's exciting future and an Aussie success story with others. However, the share price action particularly in recent days, but starting from about July last year, has been all about the short selling of CUV shares. As an investor it is disheartening to see the value of your assets decrease constantly even in the face of notable milestones and growing revenues/profits and the certainty of more to come - so lets discuss the shorting because that is what it's all about these days. I don't believe the short sellers want us to discuss this because they would prefer we believe there is something inherently wrong with the company and therefore panic and sell our shares to them at these ridiculous prices so they can profit in the future. They would prefer we analyse and attack the company and just focus on weaknesses and where possible create an environment of fear and the sky is falling down. It is not.

Clinuvel has been the subject of a severe short selling attack so it must be discussed because that is what the daily share price action is revolving around, nothing else really impacts, even the decent quarterly report and TGA filing for the drug. Without discussing short selling too much, it is IMO a disgusting practice as people who may have no interest in the company can sell shares they do not even possess to force the value of the company down, which is against the obvious interests of those who have actually stumped up cash to own part of that company. The daily volume of CUV trades is rubbish produced by circular trades (illegal in certain countries), toss in the short selling of what is in reality an extremely lightly traded stock and you can manipulate the price wherever you want. Lightly traded stocks should not be available for short selling.

Post GFC where short selling caused tremendous problems, Australia made one positive change. It ignored a host of other problems but at least now we can see the outstanding short positions in each company - the data is 4 days old (we can settle trades in 2 days wtf) but without this knowledge it would be a terrible situation right now. Without knowing what fall in the share price was caused by shorting, investors would really be panicking right now and there would be rumours getting posted on message boards about the manager is leaving, directors are selling and all sorts of rubbish to create fear and try to coerce you to sell. But luckily we have this one Weapon so we can see what is actually changing the share price and for me that is very comforting because I know it is false selling pressure, I know they have to buy back and I know all is good with my investment - except for the share price. So lets look at the most recent 5 trading days where information is available.:

Close of trade on 23/01/20 Share price $29 Outstanding short positions; 7.99%
Close of trade on 24/01/20 Share price $28.25 Outstanding short positions; 8.23% (+0.24)
Close of trade on 28/01/20 Share price $28.13 Outstanding short positions; 8.30% (+0.07)
Close of trade on 29/01/20 Share price $28.14 Outstanding short positions; 8.57% (+0.27)
Close of trade on 30/01/20 Share price $26.92 Outstanding short positions; 8.76% (+0.19)
Close of trade on 31/01/20 Share price $27.70 Outstanding short positions; 8.98% (+0.22)

So in the space of 5 trading days 500,000 shares not even owned by the seller has been sold into the market (approx. 1% of CUV shares). This is strong selling on top of the 8% already shorted and explains why the share price dropped from $29 to $27.7 in those 5 days. There is no other reason than this, it is not poor performance, directors selling or any other BS it is purely from shorting. I watched the trading closely on 29th and could see they had to short really hard to control the share price, a strong buy order did come in that day but it was also strongly shorted and 417K shares were traded so I guess there was some real buying that day amongst the other stuff. They were strongly hit again the day before the quarterly perhaps in an attempt to sow fear about impending results and then the share price recovered slightly when the actual results were released on the 31st Jan.
The shorts would have certainly increased since the 31st Jan, maybe we are at 10% now and this is what has to always be kept in mind when discussing this company, the share price is being falsely created by artificial selling pressure and the company is actually doing ok. Compared to other biotechs of similar or greater size CUV has arguably one of the strongest fundamentals IMO - the others are just not attracting such severe short attacks. With low levels of shorting the CUV price would be north of $40 and probably about $50 in this market. All IMHO.