BrainChip stock is being targeted by short sellers

BrainChip Holdings Ltd (ASX: BRN) on Monday, stocks are falling again.

Shares of the semiconductor company fell more than 1% to 87 cents in afternoon trading.

This means that with in late July, the company’s shares fell more than 31% from $1.27.

What’s going on with BrainChip stock?

As some readers know, I reveal ten at the beginning of each week the shortest shares in the Australian stock market.

Although BrainChip is not in the top ten (yet), short sellers have been building larger and larger positions in the company in recent months.

so many the most recent data shows that short sellers now have a rather ominous and diabolical percentage of 6.66%. This is equivalent to 116.4 million shares.

Why are short sellers targeting BrainChip?

Unfortunately, there is no short thesis to explain why short sellers are betting on BrainChip stock to go down. However, it is not difficult to imagine why they are attracted to the company.

The first is the company’s valuation, which is now $1.5 billion. Some might say that this expensive BrainChip has little to no profit.

For example, in the first half of the year, the company reported cash inflows of just US$1.4 million and losses of US$8.5 million. Given that the market is currently averse to losing tech stocks as interest rates rise, it’s remarkable that BrainChip’s share price has been in positive territory since the start of the year.

Short sellers may also question the company’s technology.

With BrainChip competing with giants like IBM, Intel, and Qualcomm, who invest billions in research and development, it would be incredible if BrainChip’s small team and small budget allowed it to create technology that not only outperforms the competition, but also leads the industry.

Finally, the company has made many promising announcements over the past 12-24 months, but none of them seem to have panned out. One of them was an early access program order from the space agency NASA.

It’s been almost two years since the order was placed, but it’s no longer being talked about. In fact, it appears to have ended in just three weeks on January 18, 2021 according to NASA.

What’s next?

Only time will tell where BrainChip’s stock price will go.

But it will definitely be interesting to watch from the safe side.