The short-selling and puts against marijuana stocks should have paid off. When market selling accelerated at the end of 2018 and at the start of 2019, speculative stock would get punished the most. Why is Tilray (NASDAQ:TLRY) and Canopy Growth (NYSE:CGC) rewarding shareholders instead?
TLRY stock rose 37% last week, although it failed to close the week at above $100. Canopy rose 35%, ending the downtrend that began in Oct. 2018.
Thank Privateer, a private equity firm. The investment firm needed to do just one thing: announce that it would not sell the stock when the insider lockup ends. It has 75 million shares but short-volume is so limited that share lending is scarce.
By limiting the liquidity in TLRY stock that would otherwise allow for betting against the company, TLRY stock has nowhere to move but up.
Eventually, insiders will cash out, causing the stock to fall. Tilray must report higher revenue and profit growth to justify its valuation before that happens.
Privateer Holdings is copying Facebook’s (NASDAQ:FB) move. Ahead of lockup expiration, short-selling grew because investors figured the valuation did not justify the growth at the time. Insiders, including Facebook’s CEO, simply held the stock instead of selling.
CGC and TLRY stock, along with other weed stocks, are pure speculation. They suit speculators who are looking for an easy gain on the long or short position.
