The 99% rise in Novavax's stock price brought about “rib crushing” pain and emptiness.
Zhitong Finance learned,$Novavax (NVAX.US)$Record single-day gains forced some short sellers who had shorted the stock to exit their positions at a loss; shares of the vaccine maker surged 99% on Friday. According to S3 Partners LLC, Friday's sharp rise in stock prices cost short sellers around $255 million in book losses. This biotech stock is a crowded position for short sellers, with less than 1 million shares to borrow to support the new sell-off, according to S3 data. The rapid rise in Novavax's stock price puts traders at risk of being squeezed out, that is, short sellers are forced to buy back the company's shares to balance losing positions. The bears' recovery boosted the company's share price, putting further pressure on reverse traders.
Previously, the company and$Sanofi (SNY.US)$A $1.2 billion licensing agreement was signed, which includes commercializing the novel coronavirus and influenza combination vaccines. The move boosted the company's share price, which fell about 99% from its peak in 2021 before trading due to falling demand for its COVID-19 vaccine.
Ihor Dusaniwsky, managing director of S3's predictive analytics division, said: “We expect Novavax to experience a severe shortfall, with short sellers suffering huge losses at the opening of the market and closing positions throughout the day.”
Novavax is one of the worst shorted stocks in the US, with a short equity of more than 50 million US dollars. Dusaniwsky added: “Many short sellers may hold on for a while and look for better exit prices over the next few days.”
As part of the deal, Sanofi will make an advance payment of $500 million to Novavax Pharmaceuticals and an additional payment of up to $700 million when development, regulation and listing milestones are reached. The total value of this deal is roughly double the current market value of Novavax Pharmaceuticals.
J.P. Morgan analyst Eric Joseph believes the deal “will change Novavax's overall business.” Joseph adjusted Novavax's rating from “reduced holdings” to “neutral,” and he expects that as Sanofi commercializes in 2025, many of the commercial growth pains Novavax experienced in 2023 and 2024 will be greatly mitigated.
Despite this, according to the data, Wall Street analysts are still divided in their views on the stock — three analysts gave a buy rating, and three analysts recommended holding, but none advised investors to sell. The average target price of $17 means that the stock price will rise about 91% from current levels over the next 12 months.