The major shorts in the cannabis sector continue to slide this week and are down over -2% this morning after BofA analysts Carey and Lewandowski downgraded Canopy Growth (CGC US\WEED CN) from buy to neutral and cut their target price to $27 last week. They cite an expectation of a slowdown in near-term industry growth and the negative impact of vaping legislation. The top twenty shorts in the sector are up over $200 million in mark-to-market profits since Friday.
short int is $49 mm; 4.46 mm shs shorted; 11.54% of float; 18.93% borrow fee. Shs shorted up +200k, +4.70%, over last 30 days as price fell -14%. Short int up +196k last week as price fell -11%. Shorts up +$1.8 mm in mark-to-market profits today, down just -$232k in September.Â
We are seeing the second consecutive day of price weakness in the Cannabis Sector after a mini-rally in the first week of September. Shorts in the top 20 most shorted Cannabis Stocks were up over +$100 million in mark-to-market profits yesterday and are up over +$44 million in mid-morning trading.
Tilray Inc (TLRY US) reported a larger than expected 2nd quarter loss despite beating analysts’ revenue expectations. An increase in operating expenses due to expansion was the main driver to the increase in expenses. TLRY is down over 12% on the news and virtually all the larger stocks in the Cannabis Sector are trending downward as well.
Tilray Inc’s (TLRY US) stock price is down almost 3% after reporting 4th quarter results which beat analysts’ revenue estimates. 4th quarter EBITDA losses and EPS loss which were more than twice as large as expectations turned an aftermarket rally into a losing day today.
Aurora Cannabis (ACB US – ACB CN) stock price jumped by 10% as they announced that Trian Fund’s Nelson Peltz is joining the firm as a strategic advisor. Peltz received 20 million options which will vest is transactional and price performance metrics are met.
Tilray Inc (TLRY US) short sellers are in a bind with stock loan inventory virtually all taken down and ongoing short selling demand forcing stock loan rates up markedly.
Tilray short interest is $265 million; 3.78 million shares shorted; 19.56% of float; 24.40% stock borrow fees on existing shorts and 45% to 110% fees on the new miniscule short sales that are being approved.
We are seeing stock loan recalls hitting the street in Cronos Group Inc (CRON US\CRON CN) stock today as well as increased short selling this morning. This means that stock loan supply is dwindling and stock borrow demand is increasing – translation, higher stock borrow rates in the near future and minimal short side activity in the stock.
Canopy Growth, CGC US\Weed CN, is up over 4.5% on news that Martha Stewart is joining forces with the cannabis producer to advise on marijuana related products for humans and pets.
CGC US\Weed CN short interest is $1.33 billion; shares shorted of 28.97 million shares; 12.49% of its float. Stock borrow costs are 10% fee.
The Cannabis Sector has been on a wild ride in 2019 with the ETFMG Alternative Harvest ETF (MJ US) up 47.5% for the year and the Horizons Marijuana Life Sciences ETF (HMMJ CN/HMLSF US) up 51.5% on the year. With cannabis stocks on such an upswing, short sellers have not fared well in the sector and are down $1.78 billion in mark-to-market losses for the year on outstanding short exposure of $3.86 billion.