BrainChip Holdings Ltd (ASX: BRN) shares are falling again on Monday.
In afternoon trade, the semiconductor company's shares are down over 1% to 87 cents.
This means that since the back end of July, the company's shares have dropped over 31% from $1.27.
What's going on with BrainChip's shares?
As some readers would be aware, at the start of each week, I reveal the ten most shorted shares on the Australian share market.
While BrainChip doesn't feature in the top ten (yet), short sellers have been building larger and larger positions in the company in recent months.
So much so, the most recent data shows that short sellers now have a rather ominous and devilish interest of 6.66%. That's the equivalent of 116.4 million shares.
Why are short sellers targeting BrainChip?
Unfortunately, there isn't a short thesis available to explain why short sellers are betting on BrainChip shares crashing lower. However, it isn't hard to imagine why they are attracted to the company.
The first is the company's valuation, which currently stands at $1.5 billion. Some may say that this expensive considering BrainChip is generating next to no revenue.
For example, during the first half, the company reported cash receipts of just US$1.4 million and a loss of US$8.5 million. And given how the market has an aversion for loss-making tech shares right now as interest rates rise, it's quite remarkable that the BrainChip share price is in positive territory year to date.
Short sellers could also have doubts about the company's technology.
With BrainChip competing against giants such as IBM, Intel, and Qualcomm, which invest billions into research and development, it would be incredible if BrainChip's small team and tiny budget allows it to create technology that not only outperforms its rivals but leads the industry.
Finally, the company has released a lot of promising announcements over the last 12-24 months, but none appear to have gone anywhere. One of those was an Early Access Program Order from space agency NASA.
It has been almost two years since the order was placed but no longer gets spoken about. In fact, it appears to have ended after just three weeks on 18 January 2021 based on NASA data.
What's next?
Where the BrainChip share price goes from here, only time will tell.
But it certainly will be interesting watching on from the safety of the sidelines.
