Article by Kristine Owram, Growth Op
Some prescient short sellers reduced their positions in Aphria Inc. last month, while short interest in CannTrust Holdings Inc. rose after the company disclosed a serious regulatory breach.
Aphria, which surged 40 per cent Friday after reporting quarterly earnings that beat expectations on virtually all metrics, saw a US$23.6-million decrease in the value of shares shorted, the largest drop in July among 150 cannabis stocks tracked by financial analytics firm S3 Partners.
Troubled CannTrust, meanwhile, saw a nearly US$400,000 rise in short interest last month. The Canadian producer revealed Thursday it’s under investigation by a joint task force including securities regulators and police after it grew pot in unlicensed areas of its greenhouse in Pelham, Ontario. The stock has lost more than half its value since the breach was first revealed on July 8.
Canopy Growth Corp. had the largest increase in short interest last month, with nearly US$70 million added. This might be an indication that investors aren’t all that optimistic about the company’s prospects after Co-Chief Executive Officer Bruce Linton was fired on July 3. His ouster was the result of pressure from alcohol giant Constellation Brands Inc., which in Linton’s words had decided his “turn” was over. His replacement is likely to be chosen by Constellation, the company’s largest shareholder.
Pot short sellers haven’t had a great year, losing US$690 million on the 20 most-shorted names. However, they were able to recoup more than half their year-to-date losses in July due to broad weakness in the cannabis sector.
Overall, the pot stocks and exchange-traded funds tracked by S3 have an average short interest of 8.3 per cent of their float and an average borrow fee of 16.75 per cent, about 21 times more expensive than the overall market. In July, about US$170 million worth of new shorts were added to the sector for a total of US$5.1 billion.
Aphria’s interim CEO Irwin Simon is dropping hints that he’s not going anywhere.
“I don’t look at this as interim,” Simon said Friday in a phone interview. “This is a job I am involved in 24/7 and am really enjoying it.”
Simon, the founder of Hain Celestial Group Inc., a natural snack and personal-care products company, was appointed chairman of Aphria in December and interim CEO in February after a short-seller report resulted in the ouster of former chief Vic Neufeld.
The company’s strong results last week should make a permanent appointment an easy sell to investors.