Cannabis stock report: Pot stocks rebound as experts predict a squeeze on cannabis shorts
It was a banner day for cannabis stocks all around as The North American Marijuana Index shot up to 113.37, a gain of 1.56 points. US investors started the week out well as The United States Marijuana Index rose 0.72 points to 53.48. In comparison, Candian cannabis stocks reversed a weeks-long downward trend with The Candian Marijuana Index rising 1.93 points to 202.85.
Meanwhile, there’s new word out for those who like to play the shorts game that things may not be so easy soon. According to a Bloomberg report on Monday, analyst firm S3 Partners is reporting that the cannabis sector’s potential for short squeezes has been “drastically reduced.” This is happening even though short interest is on the rise from this year’s lows.
“Lower borrow fees and year-to-date profits for those who bet against the most-shorted stocks have reduced chances for a potential squeeze on the sector, Ihor Dusaniwsky, managing director of predictive analytics at S3, wrote in a report,” noted the Bloomberg article.
A short squeeze happens when traders who bet against stocks are forced to buy when it rallies, thus preventing further losses. The process pushes the stock price higher.
According to Bloomberg, cannabis stocks are a mixed bag right now. Borrowing fees fell to 11 percent from a high of 30 percent at the beginning of the year. Short-selling is up since March, but down this year overall, as reported by S3. Cannabis stocks themselves are down 25 percent but are up 75 percent since March.
Asked why borrowing fees are falling, Dusaniwsky told Bloomberg it’s because “the lending pool has been restocked.” He also said to them that more investors are going long on cannabis shares, meaning that there’s more supply for shorts to borrow. For example, Canopy Growth saw the most significant drop in borrowing fees last month “from a trade killing 51.9 percent fee to a more palatable 9.23 percent fee,” S3 said, according to Bloomberg.
However, the lower borrow fees do come with an upside as they make short-selling cannabis stocks worth a lot more money, as per Bloomberg. “Shorts are now keeping more of their profits and paying less to their prime brokers,” Dusaniwsky told Bloomberg.
The cumulative short interest value of all cannabis stocks as of last week was $2.6 billion. Since last year, that’s down almost $876 million but up by over $100 million over the previous month.
Cannabis stock winners and losers
Vireo Health International Inc. (VREOF) gained $0.1257 per share up to $0.8001, an increase of 18.64 percent. Greenlane Holdings Inc. (GNLN) rose $0.41 per share up to $3.07 for a gain of 15.41 percent. KushCo Holdings Inc. (KSHB) jumped $0.05 per share up to $0.625, rising 8.70 percent.
cbdMD Inc. (YCBD) lost $0.24 per share down to $2.47, a decrease of 8.86 percent. Meta Growth Corp. (META:CA) fell $0.01 per share down to $0.125 for a loss of 7.41 percent. Neptune Wellness Solutions Inc. (NEPT:CA) dropped $0.12 per share down to $3.58 for a decrease of 3.24 percent.
Grasslands takes the gold
Full-service communications firm Grasslands: A Journalism-Minded Agency took home the Denver Business Journal 2020 Small Business Award last week. The agency, which has a 14-person staff and is considered one of the best in the cannabis business, won the first-place trophy in the Extra Small Business category. Their new award will sit in the company’s new agency headquarters in the Baker neighborhood.
According to a statement, the award was judged on five distinct categories, including Financial Performance, Historical Achievements, Contributions to the Industry and the Local Economy, Potential to Shape Metro-Denver’s Business Community, and Community Impact. On top of that, agencies were judged on how they’ve dealt with the fallout from the coronavirus as well.
“My colleagues and I at Grasslands are legit humbled by this tremendous honor, especially since this Small Business Award comes from a journalism institution that has exclusively covered business in Colorado since 1949,” said Founder & CEO Ricardo Baca in a statement. “My colleagues and I are in the business of communications, and we share this prestigious award with our clients—who have trusted Grasslands with their most important assets: their reputations and their brands.”
In other cannabis news…
Canopy Growth Corporation (TSX: WEED) (NYSE: CGC) announced it would be opening 10 new retail locations across Alberta under its Tweed and Tokyo Smoke banners. “We’ve seen the value brick-and-mortar retail brings to our consumers – welcoming new guests to learn about cannabis and building relationships in new communities – and we’re excited to share our knowledge and industry leadership across the region,” said Grant Caton, General Manager for Canada at Canopy Growth in a statement.
According to Hemp Industry Daily, Sen. Ron Wyden accused the FDA of stifling the CBD market's growth. He did so in a speech Thursday to the American Herbal Products Association. “However, as you all know far too well, the FDA continues to make it difficult to produce and sell CBD products,” Wyden said.
And speaking of Grasslands, check out The PotNetwork’s interview with Grassland’s Chloe Steerman, which occurred earlier this summer.