Cannabis short selling goes unabated despite September rally

seekingalpha2023-09-19

Cannabis stocks bounced back in September amid positive news on the regulatory front, but that hasn't discouraged short sellers from betting against the beaten-down sector, financial data provider S3 ...

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Short-selling in the cannabis sector has increased $91M over the past 30 days, the research firm noted, citing an analysis of 126 U.S. and Canadian pot stocks. The recent rally started in late August after Bloomberg reported that the U.S. Department of Health and Human Services recommended the U.S. Drug Enforcement Administration reclassify cannabis from a Schedule I drug to a Schedule III drug. More positive news followed as lawmakers stepped up efforts to advance the SAFE Banking Act, which will open up formal financial services to U.S. cannabis firms.  \"But if the rally was overblown or if these measures take longer than expected to come to fruition, we may see a future stock price weakness and an increase of short selling in the sector,\" S3 Partners wrote. Multi-state operators Cresco Labs (OTCQX:CRLBF), Columbia Care (OTCQX:CCHWF), and Ayr Wellness (OTCQX:AYRWF) have more than doubled in value over the past 30 days, while AdvisorShares Pure U.S. Cannabis ETF (MSOS), which represents U.S. MSOs, has added ~71%. With MSOS rising 31% for the year, the net profitability in cannabis shorts, as expected, was down -26.6% to ($105M) in 2023, according to S3 Partners' data. However, with MSOS losing -83% over the last two-and-a-half years, the profitability of cannabis short-selling has improved by +69.8% to ~$5.6B since February 10, 2021. Meanwhile, short interest in the sector has dropped 86% over the period to $692M currently, which S3 Partners attributes to the sharp decline in cannabis stock prices. \"This decline in short interest was not due to short covering,\" the firm wrote, referring to when a short seller repurchases borrowed securities to close out an open short position. \"On the contrary, we have seen increased short selling over that time period – the decline was due to the precipitous fall in the cannabis stock prices,\" S3 Partners added. According to the firm, the top ten most shorted cannabis stocks have contributed to 96% of the total short interest in the sector. Top 20 highly shorted cannabis stocks are: Tilray Brands (NASDAQ:TLRY), Canopy Growth (NASDAQ:CGC), Aurora Cannabis (NASDAQ:ACB), Cronos Group (NASDAQ:CRON), SNDL (SNDL), Curaleaf Holdings (OTCQX:CRLBF), Columbia Care (OTCQX:CCHWF), Trulieve Cannabis (OTCQX:TCNNF), Green Thumb Industries (OTCQX:GTBIF), High Tide (HITI), Cresco Labs (OTCQX:CRLBF), Verano Holdings (OTCQX:VRNOF), Organigram Holdings (OGI), WM Technology (MAPS), TerrAscend (OTCQX:TSNDF), Jushi Holdings (OTCQX:JUSHF), Planet 13 Holdings (OTCQX:PLNHF), Charlotte’s Web Holdings (OTCQX:CWBHF), Flora Growth (FLGC), Ayr Wellness (OTCQX:AYRWF). S3 Partners grouped Tilray Brands (TLRY), Canopy Growth (CGC), Aurora Cannabis (ACB), Cronos Group (CRON), and SNDL Inc. (SNDL) as the most vulnerable to either short covering or increased short selling.  More on the recent cannabis rally  Cannabis stocks up on word of Senate committee action on SAFE Banking Cannabis stocks extend rally amid positive news on regulatory front Curaleaf chairman sees DEA agreeing to reschedule marijuana Schumer pushes cannabis banking in 'Dear Colleague' letter MSOS: Cannabis Stocks Soar On HHS Recommendation To Reschedule, Buy These 3 Stocks Now","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2368188286"}