Canada’s Marijuana Stocks So Hot it’s Difficult to Bet Against Them

The annual interest rate to short giants like Aurora, Aphria or MedReleaf is over 20 percent.

By Jen Skerritt, Bloomberg

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Pot’s meteoric rise in Canada has spurred speculation of a bubble but betting against the boom isn’t so easy.

Short-selling Canadian marijuana stocks is expensive as the values of companies continue to climb and few shares are available to borrow, a key step in betting against a security. The brokerages of top Canadian banks don’t trade those stocks, and smaller firms charge prohibitive interest rates to lend them.

“It’s harder to find that borrow, and that borrow is very expensive,” said Matt Bottomley, an analyst at Canaccord Genuity Group. “It’s a hard industry to short.”

Canadian marijuana stocks have ballooned as the nation marches toward legalization by July. The country’s top four producers are now worth more than C$10 billion ($7.8 billion) after Canopy Growth Corp., the first marijuana unicorn, more than doubled this year, Aurora Cannabis Inc. more than tripled, Aphria gained more than 180 percent and MedReleaf Corp. has climbed more than 60 percent since its June debut. While investor optimism is being fueled by estimates that there could be C$6 billion in recreational salesby 2021, Canada and its provinces are still working out the details of how they will regulate, tax and distribute the products, and some publicly traded companies have yet to make a sale. Some analysts are skeptical about their demand projections.

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