© Reuters. FILE PHOTO: Cannabis plants grow at the Tilray factory in Cantanhede
By Shariq Khan and David Randall
(Reuters) – Retail investor interest appeared to spike cannabis stocks significantly on Wednesday, suggesting that the recent trading frenzy is shifting to other companies behind Reddit favorites like GameStop (NYSE :).
Tilray (NASDAQ 🙂 shares rose 40% in morning trading, while shares of Canopy growth (NASDAQ 🙂 Corp and Aurora Cannabis (NYSE 🙂 Inc both gained more than 12%. The ETFMG cannabis-stock exchange-traded fund, which has more than doubled in value since the November US presidential election, gained nearly 10%, while the broad fund rose just 0.2% before falling.
The moves came as posts promoting cannabis stocks when the next GameStop hit the popular WallStreetBets forum on Reddit, in tandem with the brief pressure that dropped the video game retailer’s shares by more than 1,650 in January % pushed up.
“I missed the Gamestop boat, but I don’t think we will miss this boat,” one user wrote https://www.reddit.com/r/wallstreetbets/comments/lgrc39/daily_discussion_thread_for_february_10_2021.
The forum has become a must for financial institution traders as concerted action by some of its 8 million attendees proved enough to force deep losses on a handful of short hedge funds in January.
GameStop’s shares are down more than 85% from their closing price of $ 347.51 on Jan. 27. This is a high point that shows the power of retail investors trading on commission-free platforms like Robinhood to influence the financial markets.
Swaggystocks, which aggregates sentiment regarding stocks talked about on the WallStreetBets forum, showed Tilray was the top-rated or most touted stock in the group.
“I don’t think the retail hunter story will go away overnight,” said Mirabaud dealer Mark Taylor. “I really just watch the price movement and try to understand everything.”
Changes promised by some Democrats in Congress could help give U.S. cannabis companies access to more traditional banking methods and open the sector to new institutional investors.
However, some analysts argue that company valuations are no longer justifiable, especially for Canadian companies like Tilray, Aphria (NASDAQ 🙂 and Canopy Growth, which may benefit very little from the changes in the US.
Canopy reported a decrease in adjusted losses in its third quarter results on Tuesday, but Stifel analysts said these did not justify the current valuation.
Another broker, Canaccord Genuity, said the US election craze caused “a disproportionate flow of capital” to Canadian producers.
Tilray’s shares, acquired by Aphria as part of a complicated reverse merger, are up more than 400% since the deal was announced in December following new agreements to supply medical cannabis to European markets.
Aphria is up 243% over the same period as businesses across the industry have grown rapidly 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, around 37% of Aphria’s free float was on loan to short sellers, compared with 27.3% at the end of January, according to research firm Ortex. In comparison, brief interest in GameStop soared to more than 100% of its free float during the Short Squeeze, which pushed its shares higher.