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Are Cannabis Stocks the New Reddit Target?

Companies and Markets

By Ihor Dusaniwsky  |  March 1, 2021

Do the high short interest numbers in some cannabis stocks make the sector a Reddit target?

Total short interest in the almost 200 U.S. and Canadian cannabis stocks in our portfolio is $4.95 billion. Short selling is highly concentrated in a handful of names with short interest of the top 20 most shorted stocks in the sector at $4.86 billion, 98% of the total.

Short interest in our portfolio has increased by $1.81 billion over the last 30 days and $1.23 billion as the sector has rallied strongly. Canopy Growth Corp. continues to be the largest short in the sector, but Tilray Inc. has closed the gap significantly.

Cannabis Stocks Short Interest

 

USD Ticker

CAD Ticker

Short Interest

YTD Change

30-Day Change

7-Day Change

Canopy Growth Corp.

CGC US

WEED CN

$1,496,228,944

$281,647,463

$218,929,743

$158,583,184

Tilray Inc.

TLRY US

N/A

$1,331,220,314

$1,200,927,376

$975,830,867

$598,212,046

Aphria Inc.

APHA US

APHA CN

$402,688,912

$212,391,089

$196,206,389

$115,153,186

GW Pharmaceuticals PLC

GWPH US

N/A

$401,022,721

$(197,317,696)

$45,986,343

$142,686,017

Aurora Cannabis Inc.

ACB US

ACB CN

$385,717,299

$(32,814,312)

$36,350,674

$39,665,167

Cronos Group Inc.

CRON US

CRON CN

$383,566,361

$(116,826,087)

$96,593,643

$51,709,376

Sundial Growers Inc.

SNDL US

N/A

$112,892,304

$102,302,853

$73,082,759

$32,046,578

HEXO Corp.

HEXO US

HEXO CN

$101,866,611

$37,320,787

$53,238,786

$24,915,176

Organigram Holdings Inc.

OGI US

OGI CN

$47,548,100

$14,778,493

$22,107,807

$21,358,643

Zynerba Pharmaceuticals

ZYNE US

N/A

$24,679,063

$(11,129,083)

$9,687,501

$9,589,318

Neptune Wellness Solutions

NEPT US

NEPT CN

$24,111,707

$(7,589,774)

$1,288,790

$1,490,049

Cresco Labs Inc.

CRLBF US

CL CN

$22,397,260

$(9,162,301)

$18,937,652

$3,432,405

Green Thumb Industries

GTBIF US

GTII CN

$20,798,306

$12,631,668

$9,002,423

$586,414

Planet 13 Holdings Inc.

PLNHF US

PLTH CN

$18,879,861

$18,002,109

$4,925,717

$2,477,795

Curaleaf Holdings Inc.

CURLF US

CURA CN

$18,497,588

$(707,990)

$(1,495,540)

$(1,304,654)

Akerna Corp.

KERN US

N/A

$17,521,069

$17,400,764

$8,475,050

$4,105,161

cbdMD Inc.

YCBD US

N/A

$17,099,441

$11,354,458

$4,998,949

$4,741,208

MediPharm Labs Corp.

MEDIF US

LABS CN

$11,791,718

$(748,911)

$4,857,594

$1,771,782

Trulieve Cannabis Corp.

TCNNF US

TRUL CN

$11,274,179

$4,099,906

$1,813,691

$1,730,333

Charlotte’s Web Holdings Inc.

CWBHF US

CWEB CN

$10,554,641

$(7,182,376)

$(913,979)

$1,673,265

 

 

 

 

 

 

 

Top 20

 

 

$4,860,356,398

$1,529,378,436

$1,779,904,860

$1,214,622,448

Total Sector

 

 

$4,946,098,056

$1,521,452,246

$1,809,097,879

$1,232,303,686

Source: S3 Partners

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 major outlier in this short covering was Tilray Inc., which has seen over $1 billion of new short selling after its announced merger with Aphria Inc. as merger arbitrage traders built their positions.

We have seen a large amount of short covering, $1.33 billion worth, in Canopy Growth Corp. as shorts are getting squeezed out of their positions as its stock price rallied over 100% in 2021. Cronos Group also saw a +100% move in 2021 and squeezed shorts to the tune of $415 million of short covering. While GW Pharmaceuticals only had a +85% move in 2021, it had the second largest amount of short covering in the sector with $814 million of buy-to-covers.

Cannabis Stocks Shares Shorted

 

USD Ticker

CAD Ticker

Total Shares Shorted

YTD $ Change

30-Day $ Change

7-Day $ Change

Canopy Growth Corp.

CGC US

WEED CN

    30,496,621

$(1,330,125,744)

$(579,362,374)

$(81,435,469)

Tilray Inc.

TLRY US

N/A

    31,445,847

$1,009,224,553

$1,087,334

$9,903,386

Aphria Inc.

APHA US

APHA CN

    22,470,548

$(250,460,553)

$(69,597,714)

$(19,114,793)

GW Pharmaceuticals PLC

GWPH US

N/A

    1,888,942

$(813,856,551)

$(190,463,469)

$22,422,932

Aurora Cannabis Inc.

ACB US

ACB CN

26,966,237

$154,648,297

$(132,450,656)

$(33,247,589)

Cronos Group Inc.

CRON US

CRON CN

31,329,554

$(415,047,262)

$(28,093,448)

$(7,448,942)

Sundial Growers Inc.

SNDL US

N/A

68,268,959

$107,074,649

$16,944,840

$(15,236,091)

HEXO Corp.

HEXO US

HEXO CN

     27,667,876

$39,065,266

$5,335,201

$3,434,915

Organigram Holdings Inc.

OGI US

OGI CN

       17,362,109

$10,959,314

$(1,053,024)

$2,352,290

Zynerba Pharmaceuticals Inc.

ZYNE US

N/A

         4,116,022

$(10,867,358)

$(777,235)

$(371,251)

Neptune Wellness Solutions Inc.

NEPT US

NEPT CN

         9,962,833

$(3,768,619)

$(2,490,570)

$(1,350,906)

Cresco Labs Inc.

CRLBF US

CL CN

     1,477,848

$(47,101,661)

$15,896,414

$(241,438)

Green Thumb Industries Inc.

GTBIF US

GTII CN

         915,574

$1,813,929

$9,844,607

$6,465

Planet 13 Holdings Inc.

PLNHF US

PLTH CN

       3,284,476

$16,319,682

$2,623,735

$(655,444)

Curaleaf Holdings Inc.

CURLF US

CURA CN

       1,650,156

$(15,632,381)

$(5,961,910)

$(3,093,480)

Akerna Corp.

KERN US

N/A

         1,923,834

$17,391,098

$3,938,400

$480,150

cbdMD Inc.

YCBD US

N/A

           2,869,536

$1,951,606

$(4,826,500)

$(392,963)

MediPharm Labs Corp.

MEDIF US

LABS CN

       16,937,679

$8,855,584

$1,554,447

$737,080

Trulieve Cannabis Corp.

TCNNF US

TRUL CN

           319,500

$(10,117,614)

$2,079,199

$928,692

Charlotte’s Web Holdings Inc.

CWBHF US

CWEB CN

         2,270,125

$(191,600)

$(3,186,868)

$(128,566)

 

 

 

 

 

 

 

Top 20

 

 

 

$(1,529,865,365)

$(958,959,591)

$(122,451,022)

Total Sector

 

 

 

$(1,539,418,254)

$(948,978,669)

$(120,906,581)

Source: S3 Partners

The large amount of short interest in some cannabis stocks, the limited supply in stock lending pools, and short squeezes already percolating in some cannabis securities could make the sector an attractive target for GME-like trading activity from the retail sector. Mark-to-market losses are already accumulating in most of the largest shorts in the sector, meaning there is already a large pile of dry powder ready to be lit to cause a short squeeze.

The top 20 cannabis shorts in the sector are down $4.32 billion in net-of-financing mark-to-market losses so far in 2021. The year-long rally has spurred short squeezes in most of the top 20 most shorted stocks in the sector and we may see the losses continuing, especially if the potential for nationwide U.S. cannabis legalization continues to increase.

There is not one stock in the top 20 that is a short-side winner. With general sector sentiment very positive, we can expect more general short covering as short sellers look for greener pastures elsewhere. But with short sellers already bloodied, full-blown short squeezes in many of these stocks may not be a surprise and long shareholders could have a tailwind of buy-to-covers helping drive stock prices even higher.

The cannabis sector exemplifies the fact that a short does not have to be crowded to become a short squeeze, large mark-to-market losses force short sellers out of their trades, and squeezes can occur in even thinly-shorted stocks. Continued price appreciation in the sector could squeeze more shorts out of the sector, and if these stocks become “Reddit” stocks, the squeezes may be more sudden and extreme and will likely come sooner rather than later.

Looking at short-selling trends over time provides insight into overall market sentiment as well as the strength of bearish conviction in individual equities.

This article originally appeared in ShortSight.

The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (“S3 Partners”) to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks, and merits, as well as the legal, tax, accounting, and investment consequences, of such decisions.

This blog post has been written by a third-party contributor and does not necessarily reflect the opinion of FactSet. The information in this report is not investment advice.

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Ihor Dusaniwsky

Managing Director and Head of Predictive Analytics, S3 Partners

Mr. Ihor Dusaniwsky is Managing Director and Head of Predictive Analytics at S3 Partners, LLC. In this role, he uses his extensive knowledge and relationships in domestic and international stock loan markets to provide insight and market color to S3’s clients, publishes research on the short side of the market, and develops internal systems and algorithms that help S3’s clients manage their portfolio and gain insight into world-wide short-selling activity and finance trends. Prior to joining S3 Partners, he was the Senior Equity Finance Trader at Commerzbank Capital Markets and Global Head of Agency Lending at Morgan Stanley. Mr. Dusaniwsky earned a B.A. in Finance from New York University and majored in Industrial and Labor Relations at Cornell University.

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