Short seller Andrew Left looks to launch cannabis fund
One of Wall Street’s most well-known short-sellers is looking to play both ends of the cannabis market.
Citron Research executive editor and founder Andrew Left told BNN Bloomberg that he is considering launching a fund dedicated to the cannabis sector that is aimed at taking long and short positions on various marijuana stocks. He said the fund could be valued in the hundreds of millions of dollars, would invest in Canadian-listed pot companies before rotating to more U.S.-based firms if they are able to list on U.S. exchanges over a 24-month period, and could be finalized by the end of the year.
“The reason why I’m thinking of putting a vehicle together for trading these stocks is because it will allow investors to trade with someone who has experience short selling,” Left said.
“You have to imagine. What you’re seeing right now [in the cannabis sector] is that all these are Canadian companies. What happens on the next wave when U.S. companies go public. Oh my God.”
Left, who The New York Times described as “The Bounty Hunter of Wall Street”, has an impressive track record of targeting U.S. and Canadian-listed firms that he believes are overvalued or are engaged in fraud. Citron’s analysis of Valeant Pharmaceuticals International Inc.’s accounting practices was considered by many investors as the first major catalyst in the company’s stunning share-price crash.
Since then, he’s taken a closer look at the skyrocketing cannabis sector and set his sights on such pot producers as The Cronos Group, Tilray Inc. and Namaste Technologies Inc. He remains short Cronos and Tilray stock, he said.
“Right now, it’s a game,” he said. “Once it stops being a game and people want to see numbers, everything changes.”
However, he still sees value in some cannabis companies, particularly those who are involved in cannabidiol, commonly referred to as CBD, the non-psychoactive chemical found in marijuana plants.
“The sector is overvalued, no doubt, but that’s not the question. The question is how long can it stay overvalued and that’s where having a short-seller -- working with a professional -- is more important than doing it yourself,” Left said.
Left points to Canopy Growth’s initial deal with Constellation Brands last year as symptomatic of a maturing cannabis sector and has taken long positions on some pot stocks, but declined to provide specifics. He added that he sees the sector still in its relative infancy and would be a prime opportunity for U.S. retail investors to start taking a serious view in the sector despite the ballooning nature of some stocks in recent weeks.
With that in mind, he sees now as the right time to consider launching his first fund in nearly three decades of investing as more U.S. states legalize the drug and amid the expectation that U.S. federal laws could change within several years.
“It’s not the ninth inning; it’s the third inning because we’re only trading with Canadian companies. There’s so many private companies in the U.S. that can’t go public in the U.S. Whether it’s going to be in two years depending on who our attorney general will be or in four years, it’s going to happen,” he said.
Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new – and controversial – Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.