Morgan Stanley is dragging down Celltrion whose stock price is flying high. This is because Morgan Stanley is publishing negative outlook reports one after another while suggesting a target stock price half the current stock price. The securities industry is critical of Morgan Stanley as the global IB has a huge amount of short selling that bets on a drop in Celltrion's stock prices.
According to the financial investment industry on October 29, Morgan Stanley presented an “Underweight” investment opinion and a target price of 80,000 won (US$71) in its Celltrion company analysis report on October 18. Jennifer Kim, a Morgan Stanley researcher set the target price of Celltrion at 80,000 won (US$71) on October 24 and 25.
Celltrion's share price stood at 208,500 won (US$187) on October 18 when the first report came out, but declined probably due to the influence of the report. Its stock price fell a whopping 8.80% to 175,200 won (US$157) on October 19. After that, it fluctuated and finished at 175,000 won (US$157) on October 27.
"Celltrion chairman Seo Jung-jin’s market share target of Remsima in the US (30% in 2018) and his market share target in Europe's Truxima market (50% in 2018) are all unrealistic," Kim said.
Remsima is a copy drug of Janssen's Remicade, an anti-autoimmune disorder drug and Truxima is a copy drug of Roche's Rituxan, a drug for the treatment of blood cancer.
The problem is that the target price suggested by Morgan Stanley significantly differs from those suggested by other securities firms. According to Wise FN, a financial information company, Celltrion’s target prices suggested by 16 securities firms for the past three months averaged 179,063 won (US$161) as of October 26. Unlike Morgan Stanley, Korean securities firms issued ten reports that raised Celltrion's target prices in over the past one month.
This makes some people have reasonable doubts about the volume of short selling held by Morgan Stanley. Morgan Stanley is a holder of a large short-selling balance that is more than 0.5% of its listed shares. This means that Morgan Stanley is betting on a drop in the stock price. It is possible to have a reasonable doubt about a possibility that the company will induce a drop in the stock price with negative reports and if and when the stock price actually falls, the company will make profit. The trade volume of short selling of Celltrion shares hit a record high of 75.2 billion won (US$67 million) on October 17, one day before the day the first report was released.
The short selling trade was active even after Celltrion was designated as an overheated short selling stock. For example, the short selling trade volume stood at 64.7 billion won (US$58 million) on October 25.