Ann: CLINUVEL Newsletter, page-22

The Shorting of Clinuvel ( CUV )
Clinuvel continues to be the subject of short selling to a massive extent, and since this affects investors negatively and is the main reason for share price fluctuations each day, I will continue to examine it. CUV is the 16th most shorted stock on the ASX, it is the only biotech stock in the top 45 most shorted stocks. What could be the reason for this; Is CUV about to go broke? No. Is CUV in urgent need of new capital? No. Is the outlook for future sales negative? No - In fact with FDA approval and EU expansion sales will most likely double or triple in coming years.
So the first thing to examine is the short sellers themselves. There seems to be a myth they are always right and something must be wrong with the company to attract this interest but this is far from the truth. Shorters tend to be fund managers for various institutions and I can confidently say they are not always the brightest people and they are definitely not always right. For example, look at those who have shorted Tesla, they are down Billions upon Billions of dollars. Closer to home it was reported by Fairfax media and AFR etc in November last year that a certain Mr King of Regal Funds was proudly stating they had a short position in another fellow Aussie biotech Polynovo and it was overpriced. At the time PNV shares were about $1.70 and today they are about $3 per share so it's not looking good there for that position, in fact I would imagine they stand to lose an enormous amount of money.
If managing other peoples money it is quite easy to be flagrant with that money and make investment decisions in the hope you will be rewarded with bonuses etc if they succeed. When they don't succeed and you stand to lose millions then your bonuses, prospects and reputation can take a hit. So with Clinuvel it was probably fair to take a short position prior to FDA approval, and this was certainly the case with about 6% shorted, and if the FDA had issued CUV with a CRL (rejection) then the shorts would have made a lot of money with the price dropping to the low teens. But, this did not happen and everyone who made that bet against CUV lost. However, if it is looked upon in the context of reputations, jobs, bonuses and other peoples money then it can be seen why the shorting continues - it is simply kicking the can down the road. Who knows what rubbish is spun to keep short positions open and themselves in a job? I am guessing it is simpler to do this and hold the CUV stock price in check rather that admit you are about to lose tens of millions of dollars on your wrong investment against CUV as soon as you close your position. So shorters will keep hoping for bad news and will keep their reputations intact for now along with their bonuses, jobs etc.
The top 45 most shorted stocks include some struggling miners, retailers, food providers, service providers and some techs - some of these companies are bad prospects some not so bad. There is only one biotech stock and I know if I was going to short an Australian biotech I would not have chosen one which is already profitable and has bright prospects. The shorters can try to do it but it is simply impossible to ignore the Elephant in the Room of FDA approval - this approval makes the companies future secure and growth certain IMO. To short 9% of CUV stock makes no sense at all post FDA approval.
We are extremely lucky as investors that we have the Knowledge and Power of ASIC daily reports for short selling. Because we know what is causing constant share price falls we know we do not need to be fearful - that is the shorters only real weapon now - to cause fear to holders and hope they sell. The below graph shows why the shorters should be extremely fearful themselves, it shows that their average sell price is less than $29. This is a bad result for them as they are only about 10% ahead on paper and they are the proud owners of some 4.5 million CUV shares which they have no chance of buying back for at a profit. I reckon if I had shorted 9% of a company's stock I would want to be more than 10% ahead unless I was certain of impending doom.




At this point the risks to the shorters themselves are immense IMO. When US sales commence and revenues from that market start it will be bad for them. When new EU markets open up it will be bad. If the chairman / directors buy CUV shares it will be bad. If topicals launch it will be bad. If the DNA repair trial starts it will be bad. TGA approval bad. New indication bad. You get the picture. The truth is simple IMO the share price will explode as soon as the shorters become buyers (as they must do) and not sellers so in the meantime they will continue to hold the price down to make themselves feel better and keep their poor investment looking ok in their minds. As holders we have time on our side, the growth will come, growth will bring new buyers and eventually shorts will have to close out as is happening with Tesla. For now I would love to see some share purchases by the Chairman and Dr Wolgen to send a signal to the market and really get this squeeze started.