Short selling is one of the main methods used to invest in pot stocks. If there are 1,000 people betting on growth in the industry, there are 1,000 people betting against that growth. The second thousand is known as short-sellers. This investing style essentially means that people are investing in the fact that a given company will go down in value. If they buy a contract for stock at a lower price than it is today and it reaches that price, they receive the spread on that deal. In the past year in pot stocks, we have seen some major bearish action. Important to note is that the majority of investors in the industry are bullish on the future of marijuana stocks.
But, some very pressing issues remain which some investors believe could mean short term losses for some of the largest pot stocks in the industry. The pot stocks mentioned below have seen an increase in the number of short sellers in the past month. These two pot stocks are also some of the most popular in the industry, which means that increasing shorts will not determine their long term futures. But, as valuations continue to fluctuate amidst cannabis stocks, looking at either an increase or decrease in shorts can help to predict short term price action.
The Big Grower Pot Stock
Aurora Cannabis (ACB Stock Report) is widely regarded as being one of the largest pot stocks in the industry. The company also happens to have the largest number of short-sellers amongst all cannabis stocks as well. From the period of December to January, the number of short shares held by investors shot up by around 30 million to 191 million shorts by January 30th. This means that around a sixth of all of its outstanding shares, all held by short-sellers. There is no one reason that this has occurred by rather, it is several compounded problems that are worth mentioning.
For starters, the company’s leadership has seen quite a tumultuous past month. CEO Terry Booth stepped down and has awaited his replacement. In addition to this, the company has stated that it is working to reduce its spending by more than half per month. Because of this, many believe that the company could be in a not so great place financially. As one of the largest growers in the industry, the company has also suffered from a shortage of cash to cover its expenditures. So as we wait for all of this to play out right now, it’s worth waiting to see what happens with Aurora in the next few months.
A Pot Stock That Should Come as No Surprise on This List
Tilray (TLRY Stock Report) has felt the brunt of the volatility amidst pot stocks. The company has continued to see large ups and downs in the past few months as it works out a new business strategy for future growth. Reports are showing that shorts shot up from around 7 million all the way up to 10 million in only a one month period ending in January of this year. Again, this is due to a series of issues all compounded together that put Tilray where it is currently. After several rounds of layoffs, the company has also been working to conserve as much free capital as it can.
It has stated that it’s major plans are to move further into Europe and the U.S. which it has not been able to do in large enough numbers as of yet. Much of the focus is on the losses that the company is taking in within its home market of Canada. Although Tilray does have quite a lot going for it, theres are some major issues that make it a difficult choice when looking for a pot stock to buy. But, it does remain one of the largest companies in the cannabis industry which shows that there could be a bright future some ways away.