Bulletin
Investor Alert

Cannabis Watch Archives | Email alerts

Aug. 7, 2019, 7:28 a.m. EDT

Short sellers are increasing bets that cannabis stocks will fall

Rise in short interest comes even as shorts lose money and have to cope with high borrow costs relative to overall market, says S3

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    ETFMG Alternative Harvest ETF (MJ)
  • X
    Horizons Marijuana Life Sciences Index ETF (HMMJ)
  • X
    Aurora Cannabis Inc. (ACB)

or Cancel Already have a watchlist? Log In

By Ciara Linnane, MarketWatch


Getty Images
Cannabis investors are increasingly betting shares will fall

Short sellers, or those betting stocks will fall, have steadily increased their exposure to the cannabis sector this year with short interest in the top 20 most shorted stocks climbing 78% to $1.89 billion, according to financial analytics firm S3 Partners.

The increase has come even though short sellers have not had a profitable year with the 20 most shorted stocks garnering $690 million in year-to-date losses, according to Ihor Dusaniwsky, S3’s managing director of predictive analytics.

“The rally we saw in cannabis stocks from late 2017 through 2018 has short sellers jonesing for a price reversal in the sector,” he wrote in a new report published Thursday.

Short sellers take a view on a stock that it will fall in price. They then borrow the shares so they can sell them, hoping they can later scoop them up at a lower price, return them to the original lender and pocket the difference.

The cannabis sector has hit a summer slump following a series of scandals and continued regulatory deadlock. A crop of weaker-than-expected earnings from Canadian licensed producers, the ousting of Bruce Linton from market leader Canopy Growth Corp. and a scandal involving illegal growing at CannTrust Holdings Inc. have weighed on stock prices.

The ETFMG Alternative Harvest ETF /zigman2/quotes/204332491/composite MJ -2.24%  has fallen 24% in the last three months, while the Horizons Marijuana Life Sciences ETF /zigman2/quotes/208856346/delayed CA:HMMJ -4.07%  has declined 26%.

For more on this story, see: Cannabis companies are having a horrible summer as scandals mount and stocks slide

At the midyear point, the biggest losers were those who had shorted shares of Canada’s Aurora Cannabis /zigman2/quotes/210559470/composite ACB -5.40% /zigman2/quotes/203734337/delayed CA:ACB -5.87% , who were facing losses of $274 million, according to S3.

Read now: One Canopy Growth co-CEO is out, and the other isn’t far behind in major shake-up at world’s largest cannabis company

See: Marijuana-delivery service Eaze scales back $1 billion ambitions, documents show

Canopy Growth /zigman2/quotes/200603886/composite CGC -2.65%   /zigman2/quotes/202205609/delayed CA:WEED -2.71%  short sellers were in the red to the tune of $227 million, GW Pharma /zigman2/quotes/209686240/composite GWPH -0.85% short sellers were down $167 million and Cronos Group /zigman2/quotes/206842762/composite CRON -6.09%   /zigman2/quotes/202715342/delayed CA:CRON -5.78%  short sellers were losing $85 million.

On a brighter note, short sellers of Tilray Inc. /zigman2/quotes/209129655/composite TLRY -4.98%  had profit of $64 million, while short sellers of CannTrust Holdings /zigman2/quotes/201332942/composite CTST -3.65%   /zigman2/quotes/206800806/delayed CA:TRST -2.81%  had profits of $53 million and short sellers of Hexo Corp. /zigman2/quotes/206508254/composite HEXO -5.19%  were looking at gains of $21 million.

Source: S3 Partners

CannTrust shares have plunged 58% in the past month after Health Canada seized more than five metric tons of the company’s cannabis after discovering it was growing in unlicensed rooms.

The selloff intensified after the Globe and Mail uncovered email traffic showing top management was aware of the illegal grow and a Danish partner confirmed that some of the product had been exported. The company pushed out Chief Executive Peter Aceto, and President Eric Paul resigned. A special committee continues to investigate the matter, and on Wednesday, hired Greenhill & Co. Canada Ltd. to help the company explore its strategic options, including a possible sale of the company.

/zigman2/quotes/204332491/composite
US : U.S.: NYSE Arca
$ 19.61
-0.45 -2.24%
Volume: 567,924
Oct. 18, 2019 8:00p
loading...
/zigman2/quotes/208856346/delayed
CA : Canada: Toronto
$ 10.60
-0.45 -4.07%
Volume: 607,473
Oct. 18, 2019 3:59p
loading...
/zigman2/quotes/210559470/composite
US : U.S.: NYSE
$ 3.68
-0.21 -5.40%
Volume: 15.70M
Oct. 18, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$3.79 billion
Rev. per Employee
$94,401
loading...
/zigman2/quotes/203734337/delayed
CA : Canada: Toronto
$ 4.81
-0.30 -5.87%
Volume: 6.69M
Oct. 18, 2019 4:15p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$4.95 billion
Rev. per Employee
$123,163
loading...
/zigman2/quotes/200603886/composite
US : U.S.: NYSE
$ 20.21
-0.55 -2.65%
Volume: 5.16M
Oct. 18, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$7.03 billion
Rev. per Employee
$115,039
loading...
/zigman2/quotes/202205609/delayed
CA : Canada: Toronto
$ 26.57
-0.74 -2.71%
Volume: 1.74M
Oct. 18, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$9.24 billion
Rev. per Employee
$150,142
loading...
/zigman2/quotes/209686240/composite
US : U.S.: Nasdaq
$ 118.11
-1.01 -0.85%
Volume: 458,946
Oct. 18, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$3.63 billion
Rev. per Employee
$20,686
loading...
/zigman2/quotes/206842762/composite
US : U.S.: Nasdaq
$ 8.32
-0.54 -6.09%
Volume: 12.86M
Oct. 18, 2019 4:00p
P/E Ratio
18.77
Dividend Yield
N/A
Market Cap
$2.84 billion
Rev. per Employee
$55,248
loading...
/zigman2/quotes/202715342/delayed
CA : Canada: Toronto
$ 10.93
-0.67 -5.78%
Volume: 1.68M
Oct. 18, 2019 4:00p
P/E Ratio
18.47
Dividend Yield
N/A
Market Cap
$3.73 billion
Rev. per Employee
$70,780
loading...
/zigman2/quotes/209129655/composite
US : U.S.: Nasdaq
$ 21.37
-1.12 -4.98%
Volume: 927,983
Oct. 18, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.09 billion
Rev. per Employee
$62,689
loading...
/zigman2/quotes/201332942/composite
US : U.S.: NYSE
$ 1.32
-0.05 -3.65%
Volume: 2.36M
Oct. 18, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$186.76 million
Rev. per Employee
$133,643
loading...
/zigman2/quotes/206800806/delayed
CA : Canada: Toronto
$ 1.73
-0.05 -2.81%
Volume: 851,390
Oct. 18, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$244.76 million
Rev. per Employee
$171,989
loading...
/zigman2/quotes/206508254/composite
US : U.S.: NYSE
$ 2.74
-0.15 -5.19%
Volume: 4.59M
Oct. 18, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$703.54 million
Rev. per Employee
N/A
loading...
1 2
This Story has 0 Comments
Be the first to comment
More News In
Industries

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.