Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Thank you for all your help. I have 4DX Medical Shares. Short Sellers have sold 40 Million shares which has driven the share price down significantly. Is there a typical period for the shorted shares to work through the market?
Hi Barbara,
Total shares held short in 4DX is at 50m shares – 8.4% of the company, which is high and it’s been rising steadily over the past month (up by 40m shares as you rightly point out). For context, about 1.5% of the ASX 200 is held short at the moment with consumer staples being the most shorter sector.
Short positions can persist for weeks, months, or years depending entirely on what the short sellers are waiting for. Importantly, they may not be just a play against a company like 4DX, they may be part of a relative call within a sector i.e. Buy company A, sell company B in the same area, and make money from the relative differential. However, with such a high percentage of shorts in 4DX, there will certainly be a reason why professionals are making a bet against the stock, and we think this would be around commercialisation concerns now the majority of regulatory approvals are in the bag.
Short sellers are not your friend in the short term, but they can actually be a medium-term tailwind, every share they’ve sold needs to be bought back eventually. The question for 4DX is whether the commercial execution, actually converting FDA approval and Medicare reimbursement into growing scan volumes and revenue, can prove the short thesis wrong – we’re 50-50 on this front.
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