The company's last update was positive, so why are Polynovo (ASX:PNV) shares still among the most shorted on the ASX?

The Polynovo Ltd (ASX: PNV) share price has continued to decline despite the company reporting positive numbers in mid-January.

While the medical device company's shares rose 2.33% to $1.315 yesterday, it hasn't been so great in 2022. In fact, for the past 6 weeks (year to date), Polynovo shares have tumbled by almost 14%.

Below, we take a look at what is impacting the company's share price of late.

Polynovo shares in top 10 open ASX short positions

The investor sentiment on the Polynovo share price has been negative due to the inconsistent performance of the business. This has ultimately attracted a large number of short sellers to the company's registry.

Short-selling is a common trading strategy that aims to profit from the fall in the price of a security. The goal is for an investor to first borrow and sell the shares, and then buy them back at a lower price for a profit.

Last week, the Australian Securities & Investments Commission (ASIC) released its short position report revealing the level of short interest within companies.

As such, Polynovo remained in the top 10 list with 8.89% of its shares being heavily shorted by investors.

In comparison, the government body had a short interest of 3.65% in Polynovo last year on 4 February.

Given the large increase in short positions being taken up, it appears investors believe the company's performance will be underwhelming.

Polynovo is scheduled to release its FY22 half-year results within the next two weeks.

Polynovo share price snapshot

Over the past 12 months, the Polynovo share price has continued its downward trend to post a 50% loss.

In comparison, the S&P/ASX 200 Healthcare (ASX: XHJ) sector has lost around 5% in the same time frame.

It's worth noting that Polynovo shares hit a multi-year low of $1.185 late last month. This is a huge difference from when its shares were trading above the $4 mark in December 2020.

Polynovo presides a market capitalisation of about $870.12 million and has approximately 661.69 million shares outstanding.