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Sirius Minerals share price: why so much short interest?

The UK-based fertiliser development company has seen short interest build against, with investors aware that it desperately needs funding after its $500 million bond offering was pulled due to poor market conditions.

Sirius Minerals Source: Bloomberg

Sirius Minerals continues to see short sellers increase their positions against the stock after its $500 million bond offering was pulled earlier this year due to poor market conditions.

Had the company’s bond offering been successfully completed it would have unlocked an additional $2.5 billion in financing from JP Morgan, ensuring the development of its polyhalite mine and likely driven up its share price.

As it stands, Sirius Minerals is in a weak position and investors know it. A government bailout looks unlikely and there is a lack of investor interest in offering the $3 billion in financing the company desperately needs.

Short interest builds against Sirius Minerals

Sirius Minerals funding woes have seen the vultures begin circling, with significant short interest building over the last four weeks.

The company currently has a 6.29% short position against it. Of the six funds with short interest in the stock Och-Ziff Management Europe and Citadel Europe hold the largest positions at 1.22% and 1.19% respectively, according to data compiled by the Financial Conduct Authority.

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Path forward unclear for Sirius Minerals

Sirius Minerals is in a precarious position, with it looking unlikely the company will secure the necessary funding it needs.

The company’s CEO worried investors earlier this year after suggesting that the business could quit the stock market.

‘Where we are now, I think we might be better off being a private company, because sentiment, short-sellers and all those sort of features are just massively distorting the value of the company,’ Sirius Minerals CEO Chris Fraser said in an interview with This is Money.

However, the company was quick to clarify that it has no plans to de-list the business, stating that the CEO’s comments were taken out of context.

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Sirius Minerals unveils new funding plan

Earlier this month, Sirius Minerals unveiled a new funding plan, with the business looking to raise £470 million to build the next stage of its potash mine in the North York Moors.

The company plans to raise the funds with the help or a strategic investor or the public debt markets by the end of April.

Sirius Minerals then plans to attempt to raise a further £1.9 billion to complete the construction of the mine and build a 23-mile tunnel that will transport minerals to its Teesside processing plant.

Investors are understandably sceptical about the company’s ability to access the funding its needs after it failed to secure financing via its bond offering in September.

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