Interest from retail investors appeared to lift cannabis stocks broadly higher on Wednesday, signaling that the recent trading frenzy behind Reddit favorites such as GameStop is shifting to other companies.
Shares of Tilray jumped 40% in morning trading, while shares of Canopy Growth Corp and Aurora Cannabis Inc both rallied more than 12%. The ETFMG cannabis stocks exchange-traded fund, which has more than doubled in value since November’s U.S. presidential elections, gained nearly 10%, while the broad S&P 500 index edged just 0.2% higher before turning lower.
The moves came as posts touting cannabis stocks as the next GameStop spread throughout the popular WallStreetBets forum on Reddit, linking it with the short squeeze that pushed shares of the video game retailer up more than 1,650% in January.
“I missed the Gamestop boat, but I don’t think we’re gunna miss this one,” one user wrote.
The forum has become a must-watch for traders at financial institutions since concerted action by some of its 8 million participants proved enough to force deep losses in a handful of short-selling hedge funds in January.
Shares of GameStop have fallen more than 85% since their closing peak of $347.51 on Jan. 27, capping a wild ride that illustrated the power of retail investors trading on commission-free platforms such as Robinhood to influence financial markets.
Swaggystocks, which aggregates sentiment on shares talked about in the WallStreetBets forum, showed Tilray was the most upvoted, or highly touted, stock in the group.
“I don’t think the retail punter story goes away overnight,” said Mirabaud sales trader Mark Taylor. “I am really only watching the price action and trying to make sense of it all.”
Changes promised by some Democrats in Congress could help give U.S. cannabis companies access to more traditional methods of banking and open the sector to new, institutional investors.
However, some analysts argue that the valuations of the companies are becoming unjustifiable, especially for Canadian companies like Tilray, Aphria and Canopy Growth, which may gain very little from U.S. changes.