Has the market gone to pot?

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Publicly listed cannabis stocks have been getting a lot of attention in the last few weeks, driven in part by the impending legalisation of recreational marijuana in Canada on 17th October.

Indeed, Tilray, seems to have been doing better than all the rest. AS CCN reports today: “At one point during premarket trading on Wednesday, Tilray shares went north of $235, representing a cryptocurrency-like 1,282 percent increase since the firm went public at $17 in July. At this level, Tilray had a market cap greater than $22 billion, representing a $91 million valuation for each of its 243 employees.”

The company’s figures also show that it is actually more valuable right now than many listed in the S&P 500 index and matches the market cap of Twitter. Interestingly, Tilray’s market cap is 714 times greater than its recently published revenue figures, which stand at $28 million in sales.

One theory for Tilray’s parabolic rise is that it managed to execute a short squeeze on short-selling firms including Citron Research. Citron said last week: ““These stock prices are equivalent to bitcoin mania — although it is even more ridiculous than bitcoin. Whereas people liked bitcoin because it was a blue sky, unregulated, difficult to mine and had no real competition in crypto currency, cannabis is highly regulated, can be farmed worldwide for cheap, and has many different players involved. Cannabis has more similarities to tomatoes than bitcoin (not saying we would be long on either tomatoes or bitcoin).”

Citron is still gobsmacked about Tilray and has tweeted that its stock value is “beyond comprehension,” which might be understandable if we were talking about tomatoes, but we’re not. The sentiment around the legalisation of cannabis use is very positive from the many supporters who have waited decades for it to happen.

Maybe cannabis stocks are this year’s fad in the run up to Christmas, or perhaps they will prove to be a new niche market that primarily appeals to pot fans. It’s hard to say: we’ll just have to sit back and watch.

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