Cannabis Shorts Gain $432M in December

With global pot stocks on decline, cannabis short sellers raked in over $432M as stock prices plummeted in the month of December.

Bloomberg’s Kristine Owram reported the weak month brought short sellers back into the black with total mark to market profits of $231M according to data gathered by financial analytics firm S3 Partners. Cannabis short interest actually declined by $505M in December, however this was caused by lower share prices rather than short sellers covering their positions.

Ihor Dusaniwsky of S3 recently reported that M&A activity is likely to continue to gain momentum in the cannabis sector. Further, increased short covering will boost stock price performance. Dusaniwsky argues cannabis short sellers will be exposed to sudden and outsized price moves due to M&A activity, which is likely to dampen short seller activity.

The Global Cannabis Stock Index declined 20.3% to $64.02 in December. Additionally, the American Cannabis Operator Index fell 18%, and the Canadian Cannabis LP Index ended the year at $704.64 with an 11.9% loss.

After losing 16% for the month, the BI Global Cannabis Competitive Peers Index ended the year down 54%.

Despite the turmoil Cronos Group (NASDAQ: CRON) (TSX: CRON) ended the month up 13.6%, Cannabis Strategic Ventures (OTCMKTS: NUGS) gained 5%, and Auxly Group (TSXV: XLY) (OTC: CBWTF) climbed 2.2%.

Since short seller Hindenburg Research and Quintessential Capital Management issued a report regarding Aphria Inc. (NYSE: APHA) (TSX: APHA) inflating prices for assets held by insiders, the company has seen an increase in short interest by 32% and shorted shares climbed 72%.

After recent allegations of fraud, Terra Tech (OTCMKTS: TRTC) plummeted 50.9%. The California company has also struggled to keep up with the ever changing state regulations — a double whammy leading to a 90.3% decline in the company’s stock.

Weed Inc. (OTCMKTS: BUDZ) fell 45.3% in December ending the year down 82.8%. Namaste Technologies Inc. (TSXV: N) (OTCMKTS: NXTTF) plunged 43.8% for the month and closed out 2018 down 75.2%. Planet 13 (OTCMKTS: PLNHF) lost 45.8%.

The Marijuana Life Sciences Index ETF (OTC:HMLSF) lost 15% and the US-listed ETFMG Alternative Harvest ETF (NYSEARCA:MJ) lost 18%.

While M&A activity is likely to dampen short selling in the sector, for now shorts are partying like it’s 1999.