Marijuana stock short sellers are losing $2.4 million per day betting against the cannabis industry
Sellers who make their money when the price of cannabis stock falls have been disappointed recently. The New York Times reports that these short sellers have lost as much as $50 million over the past six weeks due to the rising share prices of cannabis businesses.
While the number of marijuana shares shorted by sellers rose 76 percent, the price of those stocks continued to climb 46 percent. The situation for short sellers peaked on Monday when BNN Bloomberg reported on Coca-Cola and Aurora’s talks to develop a cannabis-infused drink line.
The London-based research and analysis firm IHS Markit says short sellers have lost $626 million betting against stocks since the start of August. Over the same period, shares of publicly traded cannabis stocks have risen an average of 30 percent.
The interest of big beverage companies like Coca-Cola is driven by legalization and a sign their analysts expect a lot from the industry. Coca-Cola and others would rather participate than be disrupted by the success of cannabis products.
Those who remain skeptical about marijuana’s future are taking a major hit. Short sellers who continue betting against the industry by selling borrowed cannabis shares are losing money. The plan is always to buy them back at a lower cost, but the price drop never comes.
Meanwhile, short sellers incur lending fees for borrowing the stock, which goes up as the stocks become rarer. Those betting against cannabis stocks are at an estimated loss of $2.4 million a day.