Cannabis share shorts touch new high
14 September 2018 New York
Image: Shutterstock
Short balances in the US/Canada cannabis sector have reached an all-time high, according to a note published by IHS Markit.
Figures produced by the data specialist show that 17 cannabis-related stocks have seen shares short increase since 1 August.
It also showed that there has been a meaningful reduction in some short positions, notably Canopy Growth, a medical marijuana company based in Ohio.
From an investment perspective, the cannabis sector has been on fire of late, noted IHS Markit.
There has been an average share price appreciation north of 30 percent since the start of August for US and Canadian stocks with exposure to the sector.
Sam Pierson, director of securities finance at IHS Markit, commented: “Those stocks currently have a market capitalisation of $51 billion, an all-time high, which has increased by a staggering $22 billion since the start of August. The rally in cannabis stocks has been celebrated by those who own the stocks.”
He continued: “However, it’s been a tough run for short sellers in the sector, who had been reducing exposure to space from $2.15 billion just following the Canadian legalisation vote in mid-June, to $1.5 billion at the end of July.”
IHS Markit said the reduction in short balances was partly the result of share price decline, though the average percent of shares short also declined during that period, from a 4 percent peak in mid-May to 2.7 percent at the end of July.
Since then the rally has driven the short balance to a new all-time high on the settlement for 12 September, $2.17 billion.
Pierson identified the largest contributor to the recent increase in market cap as Canopy Growth.
Its shares have nearly doubled following the announcement of a further $5 billion investment by Constellation Brands.
Investors in Constellation Brands itself were less impressed, he noted—its share price declined nearly 10 percent in the days following the announcement, though they have since recovered three-quarters of the initial drop.
Figures produced by the data specialist show that 17 cannabis-related stocks have seen shares short increase since 1 August.
It also showed that there has been a meaningful reduction in some short positions, notably Canopy Growth, a medical marijuana company based in Ohio.
From an investment perspective, the cannabis sector has been on fire of late, noted IHS Markit.
There has been an average share price appreciation north of 30 percent since the start of August for US and Canadian stocks with exposure to the sector.
Sam Pierson, director of securities finance at IHS Markit, commented: “Those stocks currently have a market capitalisation of $51 billion, an all-time high, which has increased by a staggering $22 billion since the start of August. The rally in cannabis stocks has been celebrated by those who own the stocks.”
He continued: “However, it’s been a tough run for short sellers in the sector, who had been reducing exposure to space from $2.15 billion just following the Canadian legalisation vote in mid-June, to $1.5 billion at the end of July.”
IHS Markit said the reduction in short balances was partly the result of share price decline, though the average percent of shares short also declined during that period, from a 4 percent peak in mid-May to 2.7 percent at the end of July.
Since then the rally has driven the short balance to a new all-time high on the settlement for 12 September, $2.17 billion.
Pierson identified the largest contributor to the recent increase in market cap as Canopy Growth.
Its shares have nearly doubled following the announcement of a further $5 billion investment by Constellation Brands.
Investors in Constellation Brands itself were less impressed, he noted—its share price declined nearly 10 percent in the days following the announcement, though they have since recovered three-quarters of the initial drop.
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