Broker warns meme stock holders in Denmark of risks ahead

Copenhagen

WITH the meme stock frenzy hitting Danish shores at the end of last week, one of the Nordic region's main retail brokerages is now warning clients of the potential risks ahead as they face a new and unfamiliar trading reality.

Orphazyme, a tiny biotech firm that's yet to produce a viable treatment or make money, saw its American depositary share price soar almost 1,400 per cent at one point last week. Once trading started in the Danish shares on Friday, the volatility continued.

"The extreme trading and media focus will force the company and its management into overtime," Per Hansen, an investment economist at brokerage Nordnet, said in a client note on Monday. "That will create extra work and take the focus away" from running the business. What's more, "a corporate valuation that's not financially viable or sustainable won't, in the long run, be able to alter a negative development" in the underlying business.

Orphazyme had a market value of over US$450 million after trading ended on Friday. Last month, it was worth around US$200 million.

The company, which develops therapies to treat genetic disorders, has yet to turn a profit. And so far, none of its products have made the necessary breakthrough that would allow Orphazyme to market them.

"Investors who purchase the company's ADS or shares may lose a significant portion of their investments if the price of such securities subsequently declines," the company said on Friday. BLOOMBERG