I find it staggering that shorts are taking this risk and the guys I know who run hedge funds have either closed their MSB shorts or turned around and gone long.
Maybe they are long other stocks which are doing even better than the amount Mesoblast is falling, otherwise they'll be forced to shut up shop due to underperformance once Meso starts to run. In fact, that's an inbuilt stabiliser for short positions and means that they are really frozen or delayed buying - those positions will have to be unwound at some point and will boost the share price at the time.
There is hardly any stock available to borrow for shorting at present, and even if you can get, it the borrow rate is 18% - so it's a massive cost if they hold these positions for months or a year while the share price is rising.
You might wonder if the shorts are dropping articles in newspapers and are shorting in front of that - it's a common tactic of shorters, and it's probably not illegal, though the newspapers have some questions to answer - I'm sure they are aware of these questions arising on HC and I know some investors have directly questioned them on this - and so far they've been silent, refusing to address any allegations. I'm not alleging any wrongdoing, and even if they are doing it the articles aren't even really affecting the market price or manipulating the market much after crying "wolf" so many times - I'm just wondering why the journos don't respond to the questions, as their integrity and that of their newspaper is at stake. Some of the stuff in the articles is over a decade old and was all disclosed at the time, other references are repeated ad nauseam and seem to focus on how much money the company has burned as it has spent many years running expensive clinical trials to try to prove a totally new concept in medicine. Those figures are disclosed every quarter and annually and have always been publicly available. To add them all up and breathlessly keep reporting the same thing is having less and less impact.
I hate to mention it, but I guess it is also possible that the news of the CFO leaving leaked out somewhere and someone may have shorted the stock thinking it would push the price down. I'm ABSOLUTELY NOT accusing Josh of doing this - but who knows if someone somewhere in the recruiting process did this? I wouldn't put it past the shorts to have eyes and ears in some of these firms.
Shorting hasn't rocketed up in the official net shorting position, which has been reasonably stable since the end of April, although that is a self-reported figure. It also hasn't been very evident in the amount of stock available to short, although that implies there could have been around 4m shorted recently as the price fell back under $A2 in the second half of July (or equally that they were just removed from the shorting pool which fell from 8m MSB available to short to 4m). It does seem coincidental that the share price started to rise right after the CFO resignation was announced ie if someone had shorted on this thesis, the maximum price fall usually happens around the announcement and the short covers around that day whether the price falls or not. There's not a lot of evidence of this either, as the volume has stayed relatively low and similar to July - though maybe they started covering slowly at the end of July, taking advantage of the price fall. There has been a 1.75m reduction in the official net short since 28 July - maybe still another 2m left to cover if just under 4m were shorted on this thesis - maybe that's why they're getting a bit more desperate to finish the covering off now that the price has kicked back up through $A2?
So, whether or not there was a short play arond the CFO leaving, shorts are out of ammo in terms of stock available to borrow and are trying other ways to influence the price. That's what they do. We shouldn't really be surprised as Meso is vulnerable to these attacks until it can assure "the market" that the cash burn and balance sheet is under control (a Novartis confirmation would do that and could happen at the end of this month) and/or the company can point to an FDA EUA or approval (the FDA minutes re a pathway to EUA for Covid-19 ARDS at the end of this month and/or an OTAT meeting for aGvHD in September could do that).
Further out, being able to indicate positive cash flow, profits and dividends would probably cause a big reduction in the short position.
Until then, we have to put up with these carrion feeding on prolonging the high death rate in kids with aGvHD (around 400 desperately sick kids have died in the past year waiting for the FDA to approve aGvHD) and, by trying to weaken Mesoblast, endangering the weakest in the community by stalling the only product which has been shown to have a dramatic effect on the death rate (with no side effects) in moderate to severe COVID-19 ARDS patients. Back pain sufferers remain addicted to opioids and cardiac victims mount. Shame.
MSB Price at posting:
$2.05 Sentiment: Buy Disclosure: Held
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