Evotec rose sharply on Tuesday amid market speculation that Melvin Capital Management was unwinding its positions in the German drugmaker after some of its investments turned sour.
Evotec's (EVTG.DE) shares jumped 10% at one point on Tuesday with three traders saying the move was likely linked to Melvin Capital closing out its shorts following losses on GameStop (GME.N) and other investments.
Battery maker Varta (VAR1.DE) surged for a similar reason, a German-based trader said, while shares in Polish videogame firm CD Projekt (CDR.WA)also saw strong demand. Over the last two sessions Varta and CD Projekt shares have both risen nearly 20%.
Melvin Capital, founded in 2014 by Gabriel Plotkin, said it does not comment on positions and trading.
Regulatory filings in Germany and Poland show that Melvin currently holds a short position of 6.2% in Evotec, of 4.35% in Varta and of 1.05% in CD Projekt.
Short sellers typically borrow and sell shares they expect will fall, hoping to buy them back at a lower price, pay back the loan and pocket the difference.
As of last Friday, nearly 70% of Evotec's shares available to borrow were already out on loan, data from FIS Astec Analytics showed. Shares worth almost $660 million were out on loan -- or nearly 13% of the company's market capitalisation.
Melvin said on Monday it would receive a $2.75 billion investment from Citadel, the Chicago-based hedge fund led by Ken Griffin, and billionaire investor Steven A. Cohen's Point72 Asset Management.
The infusion is expected to help stabilise the hedge fund. read more
Our Standards: The Thomson Reuters Trust Principles.