CNBC’s “Squawk On the Street” team discusses with Boris Jordan, Curaleaf executive chair, how retail investors piqued their interest in pot stocks. For access to live and exclusive video from CNBC subscribe to CNBC PRO:
Reddit traders bought into several cannabis stocks and saw a drop in prices Thursday.
Tilray shares fell 40% following a rally of more than 40% during the first three trading days. Aphria suffered 25%, after a 58% gain at the beginning of this week. After a rally that was almost 48% since Monday, Aurora Cannabis fell 17%. Canopy Growth shares fell by 17%.
These pot stocks looked poised to continue their rallies prior to Thursday’s opening, and surged in premarket trading. However, names fell sharply just before the market opened.
This week, the WallStreetBets Reddit team that helped GameStop’s dramatic short squeeze last month noticed that a group of cannabis companies was being spotlighted. Social media users have been sharing messages about their profits from pot stocks and encouraging others to do the same.
“Here we go my! TLRY to the mooon! “One post stated Thursday.
Another post stated that “Weedstocks are the new WSB darling”.
The trade ended on Thursday and the stock markets came back to Earth. CNBC was informed Wednesday by several analysts covering cannabis companies that the price action this week is not based on fundamentals.
Reddit’s discussion has been dominated by the pending merger of Aphria and Tilray. Others have also mentioned that the possibility of decriminalizing the plant at the federal levels under the Biden administration could be a positive catalyst.
Pot stocks may also have risen due to high short-interest ratios. These ratios measure the number of shares traded by a company and how often they are being used for bets against it. Retail traders targeted GameStop Entertainment and AMC Entertainment because of their high short interest, making them attractive candidates for a short squeeze. According to FactSet, Tilray’s short-interest is 5%. This means that Tilray has 5%.
These retail investors have held onto these stocks since 2017, 2018, and they are optimistic about the renewed interest from other investors.
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