Moderna (MRNA): Is it different this time?

There used to be a mantra on prop trading desks that reminded traders always to short any announcement of either a cure for AIDS or a cure for cancer. Most of the time, that logic was as reliable as the tides. One announcement after another, proclaiming a cure, sent soaring the shares of one company then another, only to have them come crashing back to earth when the details of the study became more clear.

MRNA today has announced successful trials of a melanoma vaccine. The stock has nearly doubled in this morning's premarket. MRNA's partner in the trial, MRK, is higher by a much more modest 7%. What accounts for the difference in premarket behavior? Aside from the tenfold difference in market cap (MRK obviously the far larger company), we would point to the short interest in MRNA. At last report, about 14% of MRNA public float was held short, compared to about 4% for the S&P 500 and about 1% for MRK.

Kapnotes has in the past pointed out the inexplicably desperate pattern of selling that has dogged MRNA for several months. Experienced readers of the tape would recognize a presumably intentional effect of suppressing the MRNA price, especially in the minutes just before the close of a day's session. This kind of activity is the hallmark of one or more short sellers attempting to force their will on the action.

It follows, then, that MRNA premarket action after today's announcement is reminiscent of the most incredible of short squeezes. Does today's news, on its own, justify a doubling of MRNA? Probably not. However, agile traders will watch the action closely, as the shorts must decide between an even more desperate defense or a frank concession of defeat.