Cannabis Short Sellers Raise More Than $ 450 Million in Two Days of Slip on Pot Stock

Cannabis short sellers made more than $ 450 million in the first two days of the week, nearly one-third of their cumulative losses, according to data from financial badysis firm S3 Partners.

Pot stocks fell for six consecutive trading days starting October 16, the day before Canada's legalization of marijuana for recreational purposes. The BI Cannabis Competitive Peers Index has fallen 21% since Tuesday's close, and the Horizons Marijuana Life Sciences Index ETF, the largest publicly traded fund, has lost 20% of its lowest level in two months.

Shares opened higher on Wednesday but gave up much of their initial gains. Tilray Inc. climbed 5.8% at the opening but lost 3.2% at 10:42 am in New York. Aurora Cannabis Inc. fell 0.5% from a previous gain of 6.9% on its second day on the New York Stock Exchange. Canopy Growth Corp. was down 2% after climbing 3.5%.

The recent one week drop has been a boon for short sellers, who are paying huge fees to bet that stocks will fall. According to Ihor Dusaniwsky, Research Manager at S3, Iray Dusaniwsky, Research Manager, took out an average loan of 72% to borrow due to high demand and a small float of public funds. Short sellers of pots pay more than $ 1.2 million a day to finance their borrowing costs.

"If the cost of borrowing cannabis stocks starts to fall in large capitalization companies, there may be more short sellers getting into this overheated sector looking for prices to return to more reasonable multiples based on value, "wrote Dusaniwsky. a note published on Tuesday.

Several Canadian provinces have faced supply shortages. About 46 percent of pot products have been sold, according to a survey of online retailers in five provinces, Cowen badyst Vivien Azer said in a statement released on Tuesday.

The Ontario Cannabis Store, the government-run website that is currently the only way to buy marijuana in Canada's most populous province, said Tuesday it has processed more than 100,000 orders since the October 17, but cautioned that longer than expected delivery times were expected. high demand and rotating strikes at Canada Post.

Bloomberg.com