Reddit attention helps spur cannabis stocks
Cannabis growers rallied sharply on Wednesday, continuing their month-long rally amid investor bets on the decriminalization of the industry under the Biden administration. Apparently, this time again it was not without the intervention of traders from the Reddit platform.
In one message forum Reddit sub-forum WallStreetBets, linked to a sharp rise last month by GameStop Corp, AMC Entertainment and other issuers, informed users that cannabis producers Tilray Inc and Aphria Inc have more room to grow.
This post was liked by about 10,000 other users in just twelve hours, and the shares of the two companies jumped 21% and 10%, respectively..
The forum has become a must-visit for traders of financial institutions, as the concerted actions of some of its 8 million participants were enough to cancel «short» positions of hedge funds on GameStop and other companies in January.
Swaggystocks, which collects sentiment for the stocks talked about on the WallStreetBets forum, revealed that Tilray was the most popular stock in the group.
«I don’t think the retail player story will disappear overnight», – said trader Mirabaud Mark Taylor (Mark Taylor). «I actually only watch the price movement and try to figure it all out».
US-listed shares of leading marijuana grower Canopy Growth Corp are up 3% after Tuesday’s results, while ETFMG’s cannabis stock index, which has more than doubled in value since the November presidential election, is up 7.3%..
In line with some of the conditions that drove the GameStop rally, short-term interest in Tilray was growing. According to analyst firm Ortex, about 37% of the free float was on credit, up from 27.3% at the end of January..
The company, acquired by Aphria in a complex reverse merger, has gained more than 400% in value since the deal was announced in December amid new agreements to supply its medical cannabis to European markets..
Aphria gained 243% in the same period as companies across the sector soared in value on the wave of the legalization of marijuana in the main states of the United States and the pledge of the Democratic Party to decriminalize the industry at the federal level.
Changes promised by some in the president’s party Joe Biden, can help provide cannabis companies with access to more traditional banking methods and open up the sector to new institutional investors.
However, some analysts argue that company valuations are getting unreasonably high, especially for Canadian companies such as Tilray, Aphria and Canopy Growth, which have very little to gain from the US change..
Canopy reported a cut in its third-quarter adjusted losses on Tuesday, but Stifel analysts said it did not live up to its current estimate..
Another brokerage company, Canaccord Genuity, said that enthusiasm for the U.S. election sparked «disproportionate capital inflows» in canadian manufacturers.