The bubble in crypto burst a while ago, but it seems that money has just shifted to a new investment vehicle.
That's right, the same fast money that helped push bitcoin back up near $20k has likely been helping push pot stocks to nose-bleed levels.
There is one stock in particular that stands out more than the rest.
Check this chart out:
That is the chart of Tilray, a cannabis producer.
Much of the madness is being driven by the impending legalization of recreational marijuana in Canada on Oct. 17.
However, that doesn't stop it from being madness indeed.
Some stats about Tilray:
Tilray went public in July with a $17 stock price.
Today it went over $230 per share.
That is over a 1,300% increase in 2 months. Numbers even crypto investors wouldn't sneeze at.
It currently sports a market cap of over $22 billion, all the while only having 243 employees total.
I won't get into specifics as to how much each employee would technically be worth given those numbers, but it's in the tens of millions.
Apart from the impending legalization in Canada, much of the stock's rise is likely due to a short squeeze.
Citron Research has been pounding the table on Tilray for weeks now as a screaming short.
Saying that the prices don't justify the fundamentals in any shape or form.
This is their latest commentary on the price action:
“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 either tomatoes or bitcoin).”
More ridiculous than bitcoin?!
You don't say...
Citron was also a big naysayer about bitcoin when it was running up in late 2017.
I don't feel bad one bit that it appears Citron is caught on the wrong side of a trade for the time being.
Though, they are likely right in my opinion, just early on their call.
These pot stocks don't justify anywhere near these valuations. They will come crashing down just like bitcoin did back in early 2018 once the euphoria wears off.
I would expect to see a similar correction in Tilray in the near future.
If you can short Tilray in your brokerage account at these levels, do it.
Stay informed my friends.
Follow me: @jrcornel