Cannabis stocks go for a bumpy ride after becoming the most recent target of coordinated Reddit open market moves.
A stock market researcher issued a new report highlighting the recent changes in short selling for the cannabis space.
Keep reading to find out more cannabis highlights from the past five days.
Cannabis stocks tumble after seeing Reddit-led rally
The days of unpredictability in the cannabis stock market continued this past week as the sector received the interest of online traders.
The initial rally for leading cannabis names in senior exchanges like Canopy Growth (NASDAQ:CGC,TSX:WEED), Aphria (NASDAQ:APHA,TSX:APHA) and Tilray (NASDAQ:TLRY) ended up dissipating as confusion over US policy impact took over in the discussion surrounding the sentiment of these stocks.
A report from Markets Insider, indicated the popular Reddit forum r/wallstreetbets, in which investors discuss potential trade and market activity, saw an uptick in discussion surrounding the possible gains from betting heavily in cannabis companies. The online discussion was also fuelled by recent comments from cannabis executives surrounding the possible legalization efforts in the US market.
However, while there have been hints about the approach US President Joe Biden’s administration will take towards cannabis policy several experts have told the Investing News Network (INN) the likelihood of sweeping federal legalization is scarce.
Last Wednesday (February 10) proved to be the key day of highs for cannabis names, with many reaching year highs. But then the drops showed up. Bloomberg News reported Tilray saw a drop in value of 50 percent highlighting the volatility still present with the cannabis stock market alongside substantial drops for funds covering the cannabis space.
“I think people need to be more educated about (how) all cannabis stocks aren’t the same,” Dan Ahrens, managing director and chief operating officer at AdvisorShares, which oversees the AdvisorShares Pure Cannabis ETF (ARCA:YOLO) and the AdvisorShares Pure US Cannabis ETF (ARCA:MSOS), previously told INN about the lack of clarity present for those evaluating the cannabis stock market at times.
Short selling report warns of future squeezes
The impact of the cannabis stocks volatility period also reached the short selling market. According to S3 Analytics, a research group evaluating short selling tactics in the stock market, short interest in cannabis names grew by nearly US$2 billion in the past month as of last Wednesday.
The researchers indicated Canopy Growth was still the largest short from the cannabis names but Tilray was closing in.
“We can see that short sellers have been trimming their positions into the sector’s rally with $1.54 billion of net short covering in the sector for the year,” the report prepared by Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, said.
Dusaniwsky warned short squeezes may continue for cannabis names alongside the potential for US cannabis policy changes rises.
“With general sector sentiment very positive we should expect more general short covering as short sellers look for greener pastures elsewhere,” the report said. “But with short sellers already bloodied, full blown short squeezes in many of these stocks should not be a surprise and long shareholders will have a tailwind of buy-to-covers helping drive stock prices even higher.
Cannabis company news
- Village Farms International (NASDAQ:VFF,TSX:VFF) confirmed to the market a full repayment completion to Emerald Health Therapeutics (TSXV:EMH,OTCQX:EMHTF) for the acquisition of producer Pure Sunfarms, for the remaining shares not owned by Village Farms.
- Aphria announced the appointment of Denise Faltischek, the company’s chief strategy officer, as the managing director of Aphria Germany also. “We believe the European Union continues to have many robust growth opportunities for Aphria and Germany represents the most sought-after market within those countries,” Faltischek said.
- Subversive Real Estate Acquisition REIT LP (NEO:SVX.U,OTCQX:SBVRF) informed investors it is on the way to complete its qualifying transaction as it filed preliminary prospectus for the agreed deal with InterCure (TASE:INCR), an Isreali-based cannabis company.
- Curaleaf Holdings (CSE:CURA,OTCQX:CURLF) reached the mark of 100 cannabis stores under its management across the US cannabis market. “Reaching 100 dispensaries nationwide is a remarkable milestone and Curaleaf is honored to be a trusted source for high-quality cannabis products and education for patients in Florida and communities across the country,” Joe Bayern, CEO of Curaleaf, said.
Don’t forget to follow us @INN_Cannabis for real-time updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.