Betting on Biden? Reddit fuels fresh surge in cannabis stocks

(Reuters) – Shares in North American cannabis firms were heading for new highs on Thursday, with Reddit-inspired retail investors betting they could beat the short-sellers and benefit from lighter regulation of the sector under U.S. President Joe Biden.

FILE PHOTO: Cannabis plants grow inside the Tilray factory hothouse in Cantanhede, Portugal April 24, 2019. REUTERS/Rafael Marchante

U.S.-listed Tilray and Sundial Growers, which surged more than 50% each in the previous session, were up 14% and 50% respectively in U.S. premarket trading, as European retail investors piled in to the rally.

Participants on the WallStreetBets forum on Reddit, which inspired a price spike in GameStop earlier this year that squeezed out Wall Street short-sellers who had bet on a price fall, have turned attention to U.S. and Canadian cannabis firms.

“The involvement of Reddit means a frenzy is the right word,” said Jasper Lawler, head of research at London Capital Group in London.

“I’m splitting the outlook in two. Reddit targeting a short-squeeze in Tilray means a quick pump and dump,” he said, while others looked longer-term amid prospects for lighter regulation of the sector under Biden and his Democrat allies in Congress.

Swaggystocks, which aggregates sentiment on shares discussed on the WallStreetBets forum which has about 8 million participants, showed Sundial and Tilray were the most “upvoted”, or highly touted, stocks.

Short interest in Tilray, measuring the number of shares borrowed by short sellers betting on a price fall, was about 37% on Wednesday compared to 27% at the end of January, financial analytics firm Ortex said.

Short-sellers borrow stocks and sell them on, aiming to buy them back later more cheaply and pocket the difference. If the shares move up instead, they face a ‘short squeeze’ as they race to buy the stock to close out their positions to stem losses.

Tilray was the most traded stock on German trading platform Lang & Schwarz with more than 2.4 million euros in turnover by 1116 GMT, well ahead of major German stocks such as Volkswagen and Deutsche Bank.

Other pot stocks, Sundial Growers and Aurora Cannabis, were also among the most active on the platform, reflecting high retail interest, traders said.

“It’s the Reddit army and friends,” said Stefan de Schutter, portfolio manager and Alpha Trading in Frankfurt.

Tilray jumped more than 50% on Wednesday, while U.S.-listed Sundial and Toronto-listed Aurora surged 78% and 21% respectively.

A search for Tilray showed up 217 posts on eToro, an Israeli trading platform seen as an alternative in Europe to popular U.S. retail platforms such as Robinhood.

One eToro user in Germany, @ChrisBro14, wrote in a thread about Tilray as it traded around $70: “Guess will go to $100. Where do you have TP limit. What do you think it will (do)?”

Interest in the sector lifted cannabis-focused exchange traded funds (ETFs) to new highs, with some more than doubling in value over the past month.

Graphics: Cannabis ETFs –

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