Cannabis stocks light up Reddit as sector surges to new highs

By Shariq Khan and David Randall (Reuters) - Interest from retail investors appeared to lift cannabis stocks broadly higher on Wednesday, signaling that the recent trading frenzy behind Reddit favorites such as GameStop is shifting to other companies.

Reuters February 11, 2021 00:07:12 IST
Cannabis stocks light up Reddit as sector surges to new highs

Cannabis stocks light up Reddit as sector surges to new highs

By Shariq Khan and David Randall

(Reuters) - Interest from retail investors appeared to lift cannabis stocks broadly higher on Wednesday, signaling that the recent trading frenzy behind Reddit favorites such as GameStop is shifting to other companies.

Shares of Tilray jumped 40% in morning trading, while shares of Canopy Growth Corp and Aurora Cannabis Inc both rallied more than 12%. The ETFMG cannabis stocks exchange-traded fund, which has more than doubled in value since November's U.S. presidential elections, gained nearly 10%, while the broad S&P 500 index edged just 0.2% higher before turning lower.

The moves came as posts touting cannabis stocks as the next GameStop spread throughout the popular WallStreetBets forum on Reddit, linking it with the short squeeze that pushed shares of the video game retailer up more than 1,650% in January.

"I missed the Gamestop boat, but I don't think we're gunna miss this one," one user wrote.

The forum has become a must-watch for traders at financial institutions since concerted action by some of its 8 million participants proved enough to force deep losses in a handful of short-selling hedge funds in January.

Shares of GameStop have fallen more than 85% since their closing peak of $347.51 on Jan. 27, capping a wild ride that illustrated the power of retail investors trading on commission-free platforms such as Robinhood to influence financial markets.

Swaggystocks, which aggregates sentiment on shares talked about in the WallStreetBets forum, showed Tilray was the most upvoted, or highly touted, stock in the group.

"I don't think the retail punter story goes away overnight," said Mirabaud sales trader Mark Taylor. "I am really only watching the price action and trying to make sense of it all."

Changes promised by some Democrats in Congress could help give U.S. cannabis companies access to more traditional methods of banking and open the sector to new, institutional investors.

However, some analysts argue that the valuations of the companies are becoming unjustifiable, especially for Canadian companies like Tilray, Aphria and Canopy Growth, which may gain very little from U.S. changes.

Canopy reported a reduction in adjusted losses in third-quarter results on Tuesday, but Stifel analysts said those fell short of justifying its current valuation.

Another brokerage, Canaccord Genuity, said the U.S. election-related enthusiasm had caused a "disproportionate amount of capital flow" into Canadian producers.

Shares of Tilray, which is being taken over by Aphria in a complicated reverse merger, are up more than 400% since the deal was announced in December following new agreements to supply its medical cannabis to European markets.

Aphria has gained 243% over the same period, as companies across the sector surged on a wave of legalization in major U.S. states and the Democratic party's promise to decriminalize the plant at the federal level.

Despite those gains, about 37% of Aphria's free float was out on loan for short-sellers, compared with 27.3% at the end of January, according to analytics firm Ortex. Short interest in GameStop, by comparison, soared to more than 100% of its free float during the short squeeze that pushed its shares higher.

(Reporting by Shariq Khan in Bengaluru, Thyagaraju Adinarayan and Julien Ponthus in London, and David Randall in New York; Editing by Patrick Graham, Saumyadeb Chakrabarty and Dan Grebler)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

Subscribe to Moneycontrol Pro at ₹499 for the first year. Use code PRO499. Limited period offer. *T&C apply

also read

Ethiopia's regional Tigray forces name conditions for peace with government
World

Ethiopia's regional Tigray forces name conditions for peace with government

NAIROBI (Reuters) - Forces fighting Ethiopia's military in the Tigray region laid out eight conditions on Friday for beginning peace talks, including the appointment of an international mediator and unimpeded access for humanitarian aid. Prime Minister Abiy Ahmed ordered air strikes and a ground offensive against the Tigray People's Liberation Front (TPLF) - the former ruling party in the northern region - after regional forces attacked federal army bases in the region on Nov.

Citigroup considering divestiture of some foreign consumer units - Bloomberg Law
Business

Citigroup considering divestiture of some foreign consumer units - Bloomberg Law

(Reuters) - Citigroup Inc is considering divesting some international consumer units, Bloomberg Law reported on Friday, citing people familiar with the matter. The discussions are around divesting units across retail banking in the Asia-Pacific region, the report https://bit.ly/3pD57WP said

Biden tours Pfizer vaccine plant as drugmaker promises to double supply
World

Biden tours Pfizer vaccine plant as drugmaker promises to double supply

By Alexandra Alper and Michael Erman PORTAGE, Mich. (Reuters) - U.S