Cannabis short sellers hit it big in first days

Stocks fell for six consecutive days

Cannabis short sellers made over $450 million on the first two days of the week, cutting nearly a third off their year-todate losses, according to data from financial analytics firm S3 Partners.

Pot stocks fell for six consecutive trading days beginning Oct. 16, the day before Canada legalized recreational marijuana. The BI Canada Cannabis Competitive Peers index tumbled 21 per cent from then through Tuesday’s close, and the Horizons Marijuana Life Sciences Index ETF, the largest pot exchange-traded fund, lost 20 per cent to its lowest level in two months.

The stocks opened higher Wednesday, but gave up much of their early gains. Tilray Inc. rose as much as 5.8 per cent at the open, but was down 3.2 per cent at 10:42 a.m. in New York. Aurora Cannabis Inc. was down 0.5 per cent, off an earlier gain of 6.9 per cent, on its second day on the New York Stock Exchange. Canopy Growth Corp. was down 2 per cent after rising as much as 3.5 per cent.

The recent week-long slide has been a boon to short sellers, who are shelling out huge fees to bet the stocks will fall. The average fee on outstanding shorts in the cannabis sector is 15.4 per cent, with Tilray costing 72 per cent to borrow as a result of high demand and a small public float, according to Ihor Dusaniwsky, head of research at S3.

Several Canadian provinces have been struggling with supply shortages.

The Ontario Cannabis Store, the government-run website that’s currently the only way to buy marijuana in Canada’s most populous province, said late Tuesday that it has processed more than 100,000 orders since Oct. 17, but warned of longer-than-expected delivery times.