Key Takeaways
- • Pontus Dackmo, CIO of Protean Scandinavia Funds and portfolio manager of the long/short equity fund Protean Select, says investor herding in the more liquid, retail-heavy Nordic markets creates both mispricing and difficult short timing.
- • Dackmo argues that the "madness of crowds" is a bigger constraint on shorting small caps than borrow availability or liquidity, noting that an irrationally priced stock may double again.
- • Sivers Semiconductors, cited as an example of enthusiasm around AI infrastructure and optical communications driving shares sharply higher in 2026, illustrates the risk of shorting on valuation alone.
- • Dackmo says the hurdle for shorting small and mid-caps is higher than for large caps, requiring deeper fundamental research and greater conviction, and that short-squeeze risk and short interest must be managed.
- • Protean's approach weighs market positioning and sentiment alongside valuation, with timing signaled by when the marginal buyer or seller is exhausted, and price action serving as the ultimate validation.
Summary
Pontus Dackmo, CIO of fund boutique Protean Scandinavia Funds and portfolio manager of the long/short equity fund Protean Select, argues that shorting Nordic small and mid-cap stocks requires more than identifying stretched valuations. Limited borrow availability, thin trading volumes and unpredictable price movements make timing as important as the investment thesis itself. Dackmo says Nordic markets are more liquid and have significantly higher retail participation than many other markets, which he believes creates a greater tendency for herding and overreaction on both the upside and downside.
Protean Select seeks to exploit these inefficiencies through fundamental stock selection, selective short positions and shorter-term trades with attractive risk/reward profiles. The sector-agnostic strategy relies on bottom-up analysis across both sides of the market. Dackmo says borrow availability and liquidity are constant constraints, but "mostly, it is the madness of crowds." He points to Sivers Semiconductors, a Swedish semiconductor company whose exposure to AI infrastructure and optical communications attracted substantial investor interest and sent its shares sharply higher in 2026, making it a short-seller target. The episode illustrates that momentum and speculative demand can push a price higher even when investors believe it is detached from fundamentals.
Dackmo describes timing in terms of how far a narrative has spread. "Many small and mid-cap stocks are tremendously narrative-driven, and a thesis can travel almost like a virus," he says, adding that a short case can start working when "the marginal seller or buyer has been filled." Protean's process therefore considers market positioning and sentiment alongside fundamental valuation. Dackmo also stresses that the hurdle for shorting small and mid-caps is higher than for large caps because liquidity and volatility are more challenging, requiring more fundamental research and conviction.
The article notes that a short position carries theoretically unlimited loss potential as prices rise, unlike a long position whose loss is limited to the initial investment. Heavily shorted stocks are vulnerable to squeezes that can accelerate rallies regardless of fundamentals. Dackmo cites the GameStop episode as a reminder of crowded short risk, and says understanding short interest, free float and the liquidity needed to cover a position is central to risk management. "When it comes to timing, the only validation you have is basically the price action," he says.
Protean Select seeks to exploit these inefficiencies through fundamental stock selection, selective short positions and shorter-term trades with attractive risk/reward profiles. The sector-agnostic strategy relies on bottom-up analysis across both sides of the market. Dackmo says borrow availability and liquidity are constant constraints, but "mostly, it is the madness of crowds." He points to Sivers Semiconductors, a Swedish semiconductor company whose exposure to AI infrastructure and optical communications attracted substantial investor interest and sent its shares sharply higher in 2026, making it a short-seller target. The episode illustrates that momentum and speculative demand can push a price higher even when investors believe it is detached from fundamentals.
Dackmo describes timing in terms of how far a narrative has spread. "Many small and mid-cap stocks are tremendously narrative-driven, and a thesis can travel almost like a virus," he says, adding that a short case can start working when "the marginal seller or buyer has been filled." Protean's process therefore considers market positioning and sentiment alongside fundamental valuation. Dackmo also stresses that the hurdle for shorting small and mid-caps is higher than for large caps because liquidity and volatility are more challenging, requiring more fundamental research and conviction.
The article notes that a short position carries theoretically unlimited loss potential as prices rise, unlike a long position whose loss is limited to the initial investment. Heavily shorted stocks are vulnerable to squeezes that can accelerate rallies regardless of fundamentals. Dackmo cites the GameStop episode as a reminder of crowded short risk, and says understanding short interest, free float and the liquidity needed to cover a position is central to risk management. "When it comes to timing, the only validation you have is basically the price action," he says.
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