The company, which has some high-profile shareholders, including Neil Woodford's Woodford Investment Management and Invesco Asset Management, was one of the UK's hottest initial public offerings (IPO) in 2014, with its shares having risen by nearly threefold in the year after listing.

But the shares have lost 65 percent so far this year and are trading well below their listing price on worries about the value of its portfolio.

The share price weakened significantly after the company pulled the plug on seven of its investments earlier this month.

Woodford - founder of Woodford Investment Management, a £15 billion fund group that owns nearly a third of Allied Minds - last week dismissed weakness in shares as "short-term" noise.

But demand from hedge funds to borrow shares to sell short has remained intact. Investors borrow shares to sell, betting that the price will fall so they can buy them at a lower price and make money in the process.

The number of Allied Minds shares out on loan - a key indicator of short selling interest - has doubled in the last three weeks, from four percent to eight percent, according to data provider IHS Markit.

Allied Minds, which partners with universities to fund start-ups, including a business disinfecting nut kernels, declined to comment.

New York-based hedge fund Kerrisdale Capital disclosed a short position in Allied Minds as far back as in September 2015 and published a report calling for a 70 percent drop in share price, a successful trade as of last week.

At the time, Woodford called the report "opportunistic", but other short sellers appear to have joined Kerrisdale in recent weeks.

The hedge fund's founder Sahm Adrangi told Reuters it was maintaining a short position.

"We didn't think any of the companies had any real value," Adrangi said of Kerrisdale's original report. "Usually in these situations you see a company that is worth something, but we couldn't find a single holding we thought was worth much above zero."

"If Woodford is not there I don’t know why anyone would own Allied Minds," Adrangi said.

According to latest filings, Woodford's fund owned 28.1 percent of Allied Minds.

On April 7, Invesco disclosed it sold 2.5 million Allied Minds shares, though it still owns 25 percent of the company.

Woodford, who made his name avoiding technology stocks during the tech bubble in the late 1990s, has more recently funded a number start-ups attempting to monetise intellectual property developed by universities.

"We remain strong supporters of the intellectual property commercialisation sector," he said last week. "The businesses we have backed have diverse portfolios of young, disruptive businesses with significant long-term potential."

He declined to comment further when contacted by Reuters.

(Editing by Jane Merriman)

By Alasdair Pal