Evotec shares jumped 10% at one point on Tuesday, with three traders saying the move was likely linked to the shutdown of Melvin Capital following losses on GameStop and other investments.
Battery maker Varta jumped for a similar reason, a Germany-based trader said, while shares of Polish video game company CD Projekt also saw strong demand. In the last two sessions, shares of Varta and CD Projekt have both risen by almost 20%.
Melvin Capital, founded in 2014 by Gabriel Plotkin, said it does not comment on positions and trades.
Regulatory filings in Germany and Poland show that Melvin currently holds a short position of 6.2% in Evotec, 4.35% in Varta and 1.05% in CD Projekt.
Short sellers typically borrow and sell stocks that they expect to drop, in the hopes of buying them back at a lower price, paying off the loan, and pocketing the difference.
As of Friday, nearly 70% of Evotec shares available for borrowing were already on loan, according to data from FIS Astec Analytics. Stocks worth nearly $ 660 million were loaned, nearly 13% of the company’s market capitalization.
Melvin announced Monday that he would receive a $ 2.75 billion investment from Citadel, the Chicago-based hedge fund led by Ken Griffin, and Point72 Asset Management from billionaire investor Steven A. Cohen.
The injection should help stabilize the hedge fund.
Reporting by Danilo Masoni; edited by Thyagaraju Adinarayan and Jane Merriman