Short-seller Citron Research on Wednesday said a bubble has created a “ridiculous valuation discrepancy” for recent marijuana IPO Tilray (TLRY), adding that swelling prices in marijuana stocks are equivalent to “Bitcoin mania.” But Tilray stock continued to rise, powering higher even as fellow U.S.-listed marijuana stocks Canopy Growth (CGC) and Cronos Group (CRON) retreated.
Citron said that Tilray, which became the first pure-play marijuana IPO on a big U.S. exchange in July, would need to raise more cash to finance its big expansion goals — money that’s not guaranteed. The firm also said that falling cannabis prices from more competition would hurt sales industrywide and, as more companies go public, the novelty of companies like Tilray will wear off.
“Soon the stock market will have more options as the deepest cannabis IPO pipeline in history will detract capital from Tilray and traders will have new toys to play with,” Citron said.
But, as the firm noted, traders don’t appear to care. They didn’t appear to care on Wednesday, either. Tilray stock jumped 9.6% to 104.95, hitting a new all-time high in the stock market today. Rival Canadian pot producers Canopy stock and Cronos stock lost 0.6% and 6%, respectively.
Tilray was not immediately available for comment.
The moves in the marijuana stocks followed a 13% gain for Tilray on Tuesday after the company said that a CBD oil it makes “was successfully imported” into the United Kingdom. The U.K. in July decided to allow some medical cannabis prescriptions by the fall.
As more cannabis companies seek listings and shareholder dollars in Canada and the U.S., analysts have wondered if recent bets on the industry are oversized. Constellation Brands‘ (STZ) plans to drop nearly $4 billion into Canopy have raised questions. The SEC has warned of potential fraud. Comparisons of the marijuana boom to the dotcom bubble have become more common.
Ben Kovler, the founder and chairman of Chicago-based cannabis cultivator Green Thumb Industries, disputed those comparisons in an earnings conference call last month.
“There is a tidal wave of consumer demand, and this is real,” he said. “This is not like the internet in the late ’90s, where people thought the demand was coming.”
Meanwhile, Bitcoin’s value, after charging higher last year, has continued to fall.
Marijuana Stocks Targeted
Even as Tilray surged on Wednesday, Citron said it would “gladly short more if the stock goes higher.” Short interest for Tilray, as of Aug. 15, remained low.
Tilray’s market cap stands at around $7.7 billion, according to IBD data. The company put up $9.7 million in sales in the second quarter, nearly double from a year ago. Losses widened to $12.8 million.
California legalized recreational marijuana use this year, though it’s still banned under federal law. Canada legalizes pot on Oct. 17.
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