Retail investors say BMO no longer allowing short selling on cannabis stock

TORONTO Multiple retail investors say one of Canada’s largest banks is no longer allowing them to short cannabis stocks directly through its self-directed brokerage.

The Financial Post spoke with four retail investors who said they placed calls to the Bank of Montreal’s Investorline brokerage between Friday and Wednesday morning in an attempt to either open a short position on a pot company or inquire about how to do so and were turned away by traders.

Each of the four Investorline clients, who did not wish to be named, said BMO traders would not open short positions on the particular cannabis stock they were interested in. When they asked if that applied to the sector as a whole, they said they were told shorting would not be possible for any cannabis stock.

One of the four also attempted to open a short position on Investorline’s online platform, but said the order was cancelled minutes later in a phone call from an Investorline representative.

“They said from a risk perspective, it’s too volatile,” one retail investor said.

Most of the investors said traders flagged volatility as BMO’S primary reason to disallow shorts on cannabis. Regardless of what kind of account they possessed or how much money they had in their margin accounts to serve as collateral, they were told such a trade wouldn’t be possible. Two of the four said they were also told that BMO did not have enough shares in its inventory to be loaned out.

The restrictions did not appear to extend to institutional investors who short cannabis stocks through BMO’S prime brokerage desk. One institutional investor, who did not want to be named, said shares were available to be borrowed through the desk as recently as Tuesday morning. Investment advisers at the bank also appeared to be able to short pot stocks for their clients, according to another institutional source.

The change appears to be a recent one, the four retail investors said. One investor who spoke to the Post was able to open a short position on Canntrust Holdings Inc. through Investorline as recently as July.

BMO did not return requests for comment.

The cannabis sector has long experienced high volatility, but in recent months, upward momentum has been hard to come by as the sector has been bludgeoned on concerns about a lack of profitability.