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Cannabis is the New GameStop in Reddit Rebels ‘Get Shorty’ Frenzy

Reddit’s rogue traders responsible for driving video games group GameStop through the roof have now turned their attention to the cannabis sector, promising to send it to new highs. 

Cannabis shares rallied after Reddit forum Wallstreetbets, posted on 9 February 2021 that Tilray and Aphria had significant upside in the war against big Wall Street companies making money out of shorting. According to Shariq Khan of Reuters, the post was shared by 10 000 users in 12 hours, leading to the stocks surging 21% and 10% respectively. Other stocks like Canopy Growth were up 3%, reflecting a broader sentiment that the Biden White House victory is good for the big weed business. 


Investors seek quick fortune from betting against Tilray shorting

Reuters reports that Swaggystocks, which aggregates sentiment on shares talked about in the WallStreetBets forum, showed Tilray was the most upvoted stock in the group.  Interest in cannabis spiked after GameStop shares plummeted 80% last week, wiping off US18 billion off its value, and the anti-Wall Street brigade looked for other hedge-fund shorting vulnerabilities.


Cannabis stocks have risen an indexed 7% since Biden beat Trump


Tilray had attracted short interest among the hedge funds similarly to the GameStop show, and this was on the rise. About 37% of its free float was out on loan compared to 27.3% at the end of January, according to analytics firm Ortex.  Ortex says Tilray is being taken over by Aphria in a complicated reverse merger, and has gained more than 400% in value since the deal was announced in December 2020. This was on the back of new agreements to supply its medical cannabis to European markets.

Aphria has gained 243% over the same period, as companies across the sector surged on a wave of legalization in major U.S. states and the Democratic party’s promise to decriminalize the plant at the federal level.


Dem Victory Good for Big Weed

Changes promised by the Democrat will make the business of cannabis easier in the States by opening up traditional banking and easing investment restrictions. However, the valuations of many companies remain optimistically high after the Covid rebound, and  could help give cannabis companies access to more traditional methods of banking and open the sector to new, institutional investors.

However, some analysts argue the valuations of the companies are becoming unjustifiable, especially for Canadian companies like Tilray, Aphria and Canopy Growth, which may gain very little from U.S. changes.

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