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Mar 12, 2019

Investors hoping to short Tilray find 'cupboards are bare'

An employee displays cannabis buds for a photograph at the CannTrust Holdings Inc. Niagara Perpetual Harvest facility in Pelham, Ontario, Canada, on Wednesday, July 11, 2018.

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Investors hoping to short Tilray Inc. (TLRY.O) may be out of luck as there are hardly any shares available to borrow, according to financial analytics firm S3 Partners.

The pot stock’s short interest currently stands at US$265 million or nearly 20 per cent of the company’s float and investors looking to borrow the stock are finding “the cupboards are bare,” S3 managing director Ihor Dusaniwsky wrote in an analysis. This is leading to stock borrow fees as high as 110 per cent on the new “miniscule” short sales that are being approved.

Tilray’s short interest increased steadily in the fourth quarter of 2018 to a high of 3.86 million shares, then declined somewhat in January. Since then, short sellers have been “sitting on their hands,” S3 said. The pot stock is little changed in 2019, down 0.8 per cent since the beginning of the year.

“With recalls hitting the street and stock borrow rates rising, we should see the shorts with less conviction shaken out of their Tilray short trades.” That means shorts “will not be a factor in Tilray’s stock price for the foreseeable future unless new lendable long inventory hits the stock loan market,” Dusaniwsky wrote.

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.