The Canadian marijuana stocks we’ve weeded out have accumulated large short positions as the cannabis rally hits an 11-week high since the December 21 bottom
SmallCapPower | March 8, 2019: The cannabis sector has seen continued strength throughout the new year, highlighted by positive financial disclosures, regulatory shifts and investor interest. Companies such as The Green Organic Dutchman have seen gains as much as 30% over the past month. However, the grass isn’t always greener for investors in the “Green” industry. Short interest ratios of many major producers have been steadily increasing, implying a possible drop in investor confidence. Today, we have discovered four Canadian marijuana stocks with high short interest ratios. Though some of these companies have performed well in the recent rally, their short interest ratio may give investors pause moving forward. For reference, the short interest ratio compares the number of shares currently being sold short to company’s 30-day average trading volume. A high short interest ratio can be a sign of falling investor sentiment, or an indication of a pending short-covering rally.
*Share prices as at close March 6, 2019, data obtained from S&P Capital IQ
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The Green Organic Dutchman Holdings Ltd. (TSX:TGOD) – $4.47
Cannabis
Green Organic Dutchman Holdings is a Canadian cannabis producer with operations in Quebec and Ontario. The Company strives to be the lowest cost producer in Canada by accessing the lowest power rates in its provinces of operation. The Company’s combined production capacity totaling 970,000 sq. ft. is expected to be 116,000 kg of cannabis flower. On February 8, TGOD announced it had secured a cannabis supply agreement with the Ontario Cannabis Retail Corporation. Additionally, on March 5, 2019, TGOD announced that it had received an organic certification for its Hamilton facility from Pro-cert Organic Systems. The Company hopes that this additional certification will bolster its reputation as a producer of high-quality organic cannabis products.
- Market Cap: $1,206.8 Million
- 1-Month Return: +30.7%
- 30-Day Average Volume: 4,290,000
- Shares Held Short: 10,756,353
- Short Interest Ratio: 2.5x
The Supreme Cannabis Company, Inc. (TSX:FIRE) -$2.00
Cannabis
The Supreme Cannabis Company is a Canadian publicly-traded company committed to providing premium brands and products that proudly reflect its consumers, people and uniquely innovative culture. The Company’s portfolio includes its wholly-owned subsidiary and multi-award-winning brand, 7ACRES. 7ACRES is a federally-licensed producer of cannabis operating inside a 440,000-square-foot facility in Kincardine, Ontario. In February 2019, Supreme released FQ2 financial results, highlighted by a 359% YoY increase in revenue to $7.72M. The growth was driven by the Company completing its first shipments of 7ACRES cannabis products to six Canadian provinces.
- Market Cap: $580.5 Million
- 1-Month Return: -9.5%
- 30-Day Average Volume: 1,515,000
- Shares Held Short: 3,264,983
- Short Interest Ratio: 2.2x
Cronos Group Inc. (TSX:CRON) -$30.75
Cannabis
Cronos Group operates two wholly-owned Canadian licensed producers and has distribution and production across five continents. The Company is focused on expanding its global footprint through building an international iconic brand portfolio and developing disruptive intellectual property. On January 23, the Company announced it has received a $65M credit facility co-led CIBC and BMO. On February 21, Cronos Group announced its shareholders approved the $2.4B strategic investment from Altria Group (NYSE:MO), the cigarette maker behind Marlboro. On March 4, 2019, Cronos announced that it had sold its minority interest in Whistler Medical Marijuana Corporation to Aurora Cannabis Inc. The transaction represents approximately 19% of Whistler’s outstanding common shares. Upon close, Cronos will receive approximately 2.5M common shares of Aurora with a total value of $24.6M as consideration for the transaction.
- Market Cap: $5,495.6 Million
- 1-Month Return: +8.3%
- 30-Day Average Volume: 2,988,000
- Shares Held Short: 3,264,983
- Short Interest Ratio: 1.1x
Golden Leaf Holdings Ltd. (CSE:GLH) -$0.14
Cannabis
Golden Leaf Holdings produces and distributes cannabis oil and flower products, with operations in Canada and several U.S. states including Oregon, Nevada, and California. The Company recently acquired California and Nevada assets from Tahoe, in a transaction valued at $52M. The acquisition will further solidify Golden Leaf’s presence in California and is expected to be immediately accretive. On September 24, 2018, Golden Leaf Holdings announced that its subsidiary, Medical Marijuana Group, had received its sales license from Health Canada. In January 2019, Golden Leaf secured a temporary licence to continue operations in Oregon while the State’s Liquor Control Commission deliberates on a final decision for a license. The temporary license covers extraction operations and the sale of cannabis products within the state until its expiry in December 2019.
- Market Cap: $79.5 Million
- 1-Month Return: +0.0%
- 30-Day Average Volume: 762,000
- Shares Held Short: 8,762,311
- Short Interest Ratio: 11.5x
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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