Bears Pinched in Tilray-Led Pot-Stock Rally on Legislation Hopes

image

(Bloomberg) — Short sellers in cannabis stocks are feeling the squeeze as Tilray Brands Inc. and Sundial Growers Inc. soared more than 55% each this week, and a House panel said it would vote next week for the second time to decriminalize marijuana.

Pot stocks, which have languished this year, also got a boost this week from deals in the sector and Senate passage of a bipartisan bill that would expand scientific and medical research on marijuana compounds. The global cannabis market’s growth hinges on legalization in the U.S. However, the glacial pace of federal legalization efforts in the U.S. has sowed doubts it will happen anytime soon.

Tilray and Sundial climbed to their highest levels since late last year on Friday, while U.S. shares of Canopy Growth Corp. and Aurora Cannabis Inc. both closed up 10%. Short sellers in these four stocks are down more than $360 million this week, according to S3 Partners data.

With bearish bets in these stocks mounting over the past month, “this short selling will not only wane as mark-to-market losses mount but shorts will be squeezed into reducing their short exposure,” said Ihor Dusaniwsky, a managing director at S3 who covers predictive analytics.

Two microcaps in the sector, HEXO Corp. and cbdMD Inc., could also feel the pinch, Dusaniwsky said in an interview.

ETFMG Alternative Harvest ETF, or MJ, the largest fund tracking the pot industry, advanced 15% this week.

Still, shorts may not be ready to close their bets just yet as analysts seemed less enthused by the developments, saying any decriminalization would run into obstacles in the Senate.

“Cannabis legislation is not about the House or the White House. It is all about the Senate,” Cowen analyst Jaret Seiberg wrote in a note, saying that the House vote next week will be symbolic and should demonstrate how much GOP support cannabis legalization has in the chamber. Lesser measures targeting cannabis banking may have a somewhat better chance of passage, according to policy analysts.

It’s been an optimistic week for pot stocks. Two acquisition deals announced earlier in the week sparked the initial rally in the sector with Cresco Labs agreeing to buy Columbia Care for about $2 billion, and Aurora Cannabis’s purchase of TerraFarma Inc., owner of craft cultivator Thrive Cannabis.

While most marijuana stocks are still in the red this year, Tilray’s shares are now about 22% higher in 2022 and Sundial is up 40%.

©2022 Bloomberg L.P.

Trending Ideas

Featured Stocks On The Move

Daily Rundown

Top 3 Stocks in Leading Sectors
  • 3 Electric Power Stocks To Buy Now

    Featured Content Hawaiian Electric Industries, Inc. (HE) Hawaiian Electric Industries, Inc. is a holding company that provides electric utility services and financial services in Hawaii. Through its subsidiaries, it supplies... Read More

  • 3 Bank Stocks To Buy Now

    Featured Content Comerica Incorporated (CMA) Comerica Incorporated is a financial services company headquartered in Dallas, Texas, offering a range of banking products and services, including commercial and retail banking, wealth... Read More

  • 3 Machinery Stocks To Buy Now

    Featured Content Alta Equipment Group Inc. (ALTG) Alta Equipment Group Inc. is an integrated equipment dealership platform in the United States, operating through three segments: Material Handling, Construction Equipment, and... Read More

  • 3 Silver Stocks To Buy Now

    Featured Content Gatos Silver, Inc. (GATO) Gatos Silver, Inc. is a precious metals mining company primarily focused on silver and zinc production. Its flagship Cerro Los Gatos mine in Mexico... Read More

  • 3 Metal Production Stocks To Buy Now

    Featured Content Century Aluminum Company (CENX) Century Aluminum Company is a primary aluminum producer, with operations that include the production of high-purity, low-carbon aluminum used in automotive, aerospace, and industrial... Read More

  • 3 Medical Drug Stocks To Buy Now

    Featured Content Teva Pharmaceutical Industries Limited (TEVA) Teva Pharmaceutical Industries Limited is a global pharmaceutical company specializing in generic and specialty medicines. The company provides a wide range of treatments... Read More

  • 3 Paper Product Stocks To Buy Now

    Featured Content AptarGroup Inc. (ATR) AptarGroup Inc. is a global leader in providing innovative dispensing and packaging solutions, serving diverse industries like beauty, personal care, and pharmaceuticals. They focus on... Read More

  • 3 Restaurant Stocks To Buy Now

    Featured Content Brinker International, Inc. (EAT) Brinker International, Inc. operates well-known restaurant brands such as Chili’s Grill & Bar and Maggiano’s Little Italy. The company is a leader in the... Read More

  • 3 Investment Brokerage Stocks To Buy Now

    Featured Content Robinhood Markets, Inc. (HOOD) Robinhood Markets, Inc. is a financial services company known for its commission-free trading platform, which allows users to trade stocks, options, cryptocurrencies, and ETFs.... Read More

  • 3 Shipping Stocks To Buy Now

    Featured Content ZIM Integrated Shipping Services Ltd. (ZIM) ZIM Integrated Shipping Services Ltd. is a global container shipping company that provides cargo transportation services worldwide. The company operates a modern... Read More

  • 3 Mining Stocks To Buy Now

    Featured Content Perpetua Resources Corp. (PPTA) Perpetua Resources Corp. is a mining company focused on the exploration and redevelopment of the Stibnite Gold Project in Idaho, which is one of... Read More

  • 3 Airline Stocks To Buy Now

    Featured Content General Electric Company (GE) General Electric Company is a global industrial conglomerate with operations spanning sectors such as aviation, healthcare, power, and renewable energy. GE is known for... Read More