By Shariq Khan and David Randall
(Reuters) – Small business investors’ interest in cannabis shares rose higher on Wednesday, suggesting that the recent trade chase behind Reddit favorites such as GameStop is shifting to other companies.
Shares of Tilray rose 40% in the morning trading, while shares of Canopy Growth Corp and Aurora Cannabis Inc both rose more than 12%. The ETFMG bursary fund, which has more than doubled since the US presidential election in November, rose nearly 10%, while the broad S&P 500 index rose just 0.2% higher before declining.
The move came as messages about cannabis stocks spread the following GameStop through the popular WallStreetBets forum on Reddit, linking it to the short-term push that boosted video game retailer shares by more than 1,650% in January.
“I missed the Gamestop boat, but I do not think we miss the one,” wrote one user.
The forum was a must-watch for traders at financial institutions, as joint action by some of its 8 million participants was enough to force deep losses into a handful of short-selling hedge funds in January.
Shares in GameStop have fallen more than 85% since their last high of $ 347.51 on January 27, marking a wild ride that shifts the power of retail investors trading on commission-free platforms like Robinhood to impact financial markets. illustrate.
Swaggystocks, which discusses the sentiment about shares in the WallStreetBets forum, showed that Tilray is the share in the group most named.
“I do not think the retail story is going to go away overnight,” said Mirabaud trader Mark Taylor. “I’m actually just watching the price action and trying to make sense of it.”
Changes promised by some Democrats in Congress could help give U.S. cannabis companies access to more traditional banking methods and open up the sector to new, institutional investors.
However, some analysts argue that the valuations of the companies are becoming unjustified, especially for Canadian companies such as Tilray, Aphria and Canopy Growth, which can earn very little from US changes.
Canopy on Tuesday reported a decline in adjusted losses in third-quarter results, but Stifel analysts said it did not justify the current valuation.
Another broker, Canaccord Genuity, said U.S. election-oriented enthusiasm had caused an “excessive amount of capital flow” to Canadian producers.
The shares of Tilray, which is being taken over by Aphria in a complicated reverse merger, have been up more than 400% since the deal was announced in December following new agreements to supply medical cannabis to European markets.
Aphria rose 243% in the same period, as companies across the sector rose with a wave of legalization in major US states and the Democratic Party’s promise to criminalize the plant at the federal level.
Despite the gains, according to the analysis firm Ortex, about 37% of Aphria’s free float was bought out for short sellers, compared to 27.3% at the end of January. The short interest in GameStop compares favorably to more than 100% of its free driving force during the short press that pushed its shares higher.
(Reporting by Shariq Khan in Bengaluru, Thyagaraju Adinarayan and Julien Ponthus in London, and David Randall in New York; edited by Patrick Graham, Saumyadeb Chakrabarty and Dan Grebler)