Ebb & Flow

Arpida (SWX:ARPN) took a 26% hosing on Wednesday, its first trading day, shedding CHF4.70 to CHF13.30. Company management and ARPN's VCs can be ruled out as the sellers, as both groups have their shares locked up. On Wednesday, 2.2 million shares traded hands, which is 41% of the 5.4 million shares that ARPN sold in the IPO.

The consensus is that the culprits were short sellers.

Andy Smith of 3i thinks that hedge funds found some shares to short. In turn, he said, this might have spooked some of the generalist investors who subscribed for shares. "I was surprised that hedge funds could borrow the stock that quickly," he said.

ARPN CFO Harry Welten told Ebb & Flow the company does not have specific information about who was trading the stock. But, he said, "from the number of shares traded, the volatility and the way the stock behaved, it could be that someone is short selling. However, there is nothing we can do about it. As long as someone is willing to lend their stock to short sellers, we can't do anything. None of the fundamentals have changed, so it's pretty frustrating both for us and all investors in the stock."

The good news, said Smith, is that ARPN "might recover after the hedge funds close out their gains." But there's not much companies can do to combat the shorts, he said. "You just have to grin and bear it."

John Goodey of Deutsche Bank, the lead bank on the IPO, said ARPN's after-market performance underscores that "biotech market conditions in Europe are tough, even for late-stage companies. The question is whether this will be short or long term, and the next few offerings could answer that."

After selling shares at CHF18, ARPN was valued at CHF294.7 million

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