The Canadian cannabis stocks we’ve discovered have an average of 21.75M shares sold short
SmallCapPower | April 29, 2019: There has been a large inflow of capital within cannabis stocks over the past year especially among Canadian companies, which has led to some lofty valuations. Short sellers believe the sky-high valuations will have to come down and are betting against the stocks, albeit at an expensive cost. According to data from S3 Partners, a data analytics firm, the average borrow fee to short cannabis stocks is 16.5%, which cost short sellers a total of $200M for the month of February. Today we have identified four Canadian cannabis stocks that have the largest short positions.
The short interest ratio takes the number of shares being held short and divides it with the 30-day average trading volume of shares traded. The ratio measures the amount of days it would take the shorted shares to be covered in the market.
*Share prices as at close April 25, 2019, data obtained from S&P Capital IQ
Aurora Cannabis Inc. (TSX:ACB) – $12.22
Aurora Cannabis is a licensed distributor and producer of medical marijuana. The Company expects to have approximately 1,000,000 sq. ft. of licensed production space and produce 270,000 kg of cannabis annually. Aurora intends to convert several existing outlets, as well as develop new stores, for the sale of cannabis to the recreational market. The Company has signed supply agreements with 12 provinces and territories, making up over 98% of the Canadian population. On April 26, Aurora and EnWave announced a global licensing agreement with EnWave. This agreement will provide Aurora exclusive rights to EnWave’s patented Radiant Energy Vacuum drying technology to produce cannabis materials in the European Union excluding Portugal.
- Short Interest Ratio: 6.2x
- Market Cap: $12.4B
- 1-Month Total Return: -1%
- 30-Day Average Trading Volume: 8.1M
- Shares Held Short: 50.2M
Heritage Cannabis Holdings Corp. (CSE:CANN) – $0.55
Heritage Cannabis Holdings is a vertically-integrated cannabis provider with two production licenses. The Company operates four subsidiaries, which include Voyage Cannabis, CannaCure, Puerefarma Solutions, and BriteLife Sciences. PhyeinMed Inc. and CannaCure are both regulated through the Cannabis Act Regulations. Puerefarma Solutions provides extraction services and BriteLife Sciences is focused on cannabis-based medical solutions. On April 12, Voyage, a subsidiary of Heritage Cannabis Holdings signed an agency agreement with Cannavolve. The agency agreement will support the recreational product sales across Canada.
- Short Interest Ratio: 4.8x
- Market Cap: $20.1M
- 1-Month Total Return: -9.9%
- 30-Day Average Trading Volume: 3M
- Shares Held Short: 14.3M
Green Organic Dutchman Holdings Ltd. (TSX:TGOD) – $4.20
Green Organic Dutchman Holdings is a Canada-based cannabis producer with operations spanning from Ontario to Quebec. TGOD has already received the ACMPR cultivation and sales license but the facilities are currently under construction. Green Organic Dutchman aims to be the lowest cost producer in Canada by accessing the lower power rates within the provinces in which they operate. The combined production capacity of the two facilities totaling 970,000 sq. ft. is expected to be 116,000 kg of cannabis flower. On April 26, TGOD’s European subsidiary, HemPoland, received certification that its products are organic from the Polish Centre for Accreditation on authority from the Minister of Agriculture and Rural Development.
- Short Interest Ratio: 3.8x
- Market Cap: $1.2B
- 1-Month Total Return: -14.5%
- 30-Day Average Trading Volume: 3M
- Shares Held Short: 11.5M
HEXO Corp. (TSX:HEXO) – $9.66
HEXO produces, markets, and sells cannabis products in Canada. The Company is one of the largest licensed cannabis companies in Canada, operating over 1.1 million sq. ft. of facilities in Ontario, Quebec, and Greece, where it plans to establish a Eurozone processing, production, and distribution center. On March 13, HEXO announced it was planning on acquiring Newstrike Brands (TSXV:HIP) in an all-stock deal valued at ~$263M, or $0.46 per Newstrike share. Each Newstrike shareholder will receive 0.06332 of a HEXO share for each Newstrike share held, implying a 4.1% takeover premium, based on HEXO’s and Newstrike’s March 12 closing price of $7.40 and $0.45, respectively. The merger is expected to increase HEXO’s cultivation space to 1.8M sq. ft and HEXO will gain a supply deal with the Ontario Cannabis Store (OCS).
- Short Interest Ratio: 3.9x
- Market Cap: $2.1B
- 1-Month Total Return: 6.4%
- 30-Day Average Trading Volume: 2.8M
- Shares Held Short: 10.9M
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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