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Weed Stocks Go Parabolic After GameStop Reddit Mob Looks For New Targets

Weed Stocks Go Parabolic After GameStop Reddit Mob Looks For New Targets

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Weed Stocks Go Parabolic After GameStop Reddit Mob Looks For New Targets. Image created by Moguldom

The same WallStreetBets Reddit mob that contributed to the epic short squeeze of GameStop and other out-of-favor stocks in January is targeting weed stocks, betting that the federal government will legalize cannabis under a new Democratic administration.

“Weed about to make me a millionaire in 2021,” a Redditor posted on Tuesday, with more than 108,000 likes.

Four publicly traded Canadian cannabis stocks surged on Wednesday, then gave up some gains on Thursday. Pharmaceutical and cannabis company Tilray was up 50 percent for a year-to-date gain to more than 670 percent on Wednesday, CNBC reported. Then it fell 22 percent on Thursday, Investors Business Daily reported. Cannabis research and development firm Canopy Growth rose 6 percent — part of a 110-percent rally in 2021. On Thursday, it lost 11 percent. Aphria, a producer and distributor of medicinal and recreational cannabis, saw its stock go up 10 percent on Wednesday — it was up 280 percent this year alone — then fall 13 percent on Thursday. Weed producer Aurora Cannabis went up 20 percent Wednesday for a year-to-date increase of 120 percent, then fell 8.6 on Thursday.

A pending merger between Tilray and Aphria has been part of the discussion on Reddit forum WallStreetBets. Aphria shareholders are expected to receive about 0.84 share of Tilray per share of Aphria when the deal closes, according to a December press release, CNBC reported.

″$TLRY $APHA calls since 1/5/2021 got me to over $500k today. Still think it has much upside,” a Redditor posted.

It isn’t just about Redditors’ hunt for the next big play. Weed stocks have been rising for months, Barron’s reported. Canadian stocks have recently outperformed U.S. operators, but shares of U.S. growers Curaleaf Holdings, Green Thumb Industries and Cresco Labs also increased between 4.5 percent and 7.5 in the rally. 

Marijuana stocks rose on after Election Day, but it’s uncertain what shape U.S. cannabis reform might take, Investors Business Daily reported. Canada’s entry into the U.S. market isn’t guaranteed.

The GameStop short squeeze began when retail traders on a Reddit chat board got tired of investment bankers at hedge funds shorting GameStop and other stocks. Short-sellers bet that a stock will go down. GameStop had been trading at a low price and hedge funds expected it to fall further. When things don’t go according to plan and the price of the stock goes up, the damage to hedge fund short sellers can be devastating.

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“One thing that hedge funds didn’t hedge against in the GameStop case are thousands of small traders on Reddit who had noticed a number of stocks being shorted by hedge funds that had been essentially preying on troubled companies during a recession,” Jay Ramey wrote. 

Retail traders targeted GameStop, AMC Entertainment, silver and other stocks in part because their “high short interest” made them attractive candidates for a short squeeze. 

The interest in weed stocks “is totally on script for the anti-establishment movement on WSB and Reddit,” said Tim Welsh, founder and CEO of wealth management consulting firm Nexus Strategy, in a CNBC interview. “They are feeling their crowd-funding oats and are now aiming it at whatever social disruption they can cause. And no better historical symbol to amplify personal freedom and revolution than pot.”