(Potential) short squeeze

What I am doing:

• Re-entered a new CU6 position last week after a successful exit last year.
• Watch closely and, if SP continues to grind higher, likely increase position.
• I don’t have a Price Target, exit will depend on price action, sentiment and news in the near future.
• Would love to receive constructive comments, in particular the bear case, eg likelihood of capital raise and timing.

CU6 - potential short squeeze

(Thanks to @Davisite for the significant insights and input)

• It is was a particular play by the hedge funds on the index funds
• They take a speculative company sitting outside the ASX300 (in this case CU6) and then buy it up into the ASX200 and then sell their shares to the index funds.
• Once that happens they borrow from the index funds and short it down and wait for the company to be kicked out of the ASX200 and then cover when the index fund has to sell.
• CU6 wasn’t kicked out of the ASX200 in the June 2025 rebalancing.
• Hedge funds that shorted CU6 are trapped because CU6 wasn’t kicked out of the ASX200.
• CU6 is currently the 12th most shorted stock on the ASX with 8.5% short position.
• Hedge funds are trying to fight the rise as the short position is rising, but so is the share price (SP).

• The risks are:
  • 1) bad results announced (doubtful but can happen in biotech) and
  • 2) capital raise where hedge fund can cover shorts by participating in raise (more likely).

• ASX200 index has a relatively low market cap cut-off (around AUD3B) and more susceptible to these hedge fund tactics.
• The ASX is much easier to execute these tactics as nobody fears ASIC like they do the SEC.
• This happened with IMU in the lead up to its ASX200 Index inclusion and exclusion. Hedge funds were successful with their shorting of IMU due to IMU weak capital position resulting in multiple capital raises and IMU’s higher clinical risks. IMU % Short peaked around 7% in the lead up to its 2023 cap raise and ASX exclusion vs 8.5% now for CU6.

Long story short (or in CU6’s case … short story short):

• Potential short squeeze on the hedge funds that are betting on ASX200 exclusion and potential capital raise.
• The SP could explode higher very quickly, in particular if there are positive results announced as the shorters can’t easily cover from the index funds.