Alberta Cannabis Inc / Brochure via REUTERS
- Cannabis stocks plummeted on Thursday, with optimism about federal decriminalization and the upward trend of Reddit dealers turning into profits.
- Tilray, Aphria, Aurora Cannabis, Cronos and Canopy Growth fell amid widespread sales.
- Members of the Reddit Wall Street Bets website were rooting for bullish stocks, just as they did with GameStop in January.
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The pot’s shares fell from the spotlight earlier in the week, with the momentum of casual traders coming together on Reddit.
Tilray led the sector’s losses, falling 34%. Aphria and Aurora Cannabis fell 27% and 19%, respectively. Cronos sank 16% at intraday lows, and canopy growth dropped 18%.
The group of cannabis growers met during the week amid hopes that Democrats would soon seek federal decriminalization of marijuana. Canopy CEO David Klein told investors on Tuesday that he expects the Biden government to decriminalize the drug and expand the U.S. market later this year. Tilray Chief Executive Brendan Kennedy said his company expects federal legalization to be achieved in the next 12 to 18 months.
The sector received a second boost from Reddit traders in Wednesday’s trading. Members of the r / wallstreetbets forum have started announcing Tilray, Aphria and other cannabis producers as the next stocks to generate extraordinary gains. Posts boasting massive returns on pot-stock options soared to the top of the Reddit page and received thousands of comments.
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When markets closed on Wednesday, several marijuana stocks were at their highest levels in years. Exchange-traded funds, including Global X Cannabis, ETFMG Alternative Harvest and Amplify Seymour Cannabis were the best performing ETFs of the year to date.
The retailer’s enthusiasm now appears to have waned. Profit-taking outpaced the stock’s high in the pot when the market opened on Thursday, prompting the stock to fall sharply.
The sudden reversal questions the ability of Reddit traders to drive sustainable highs. The GameStop phenomenon that dominated market conversations in January similarly faded this month, as those who accumulated made profits or minimized losses. Wall Street Bets day traders have soared around other stocks since then, although not with the unit that fueled GameStop’s rise.
Certainly, the pot’s shares plummeting in Thursday’s trading remain well above last month’s prices. Tilray, for example, remains up to 421% for the year.
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