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Canadian pot stock jumps 38 percent in wild day of trading

CNBC logo CNBC 9/19/2018 Thomas Franck

Shares of Canadian marijuana producer Tilray gave up a 90 percent one-day surge and turned negative briefly in a wild day of trading Wednesday. 

The stock, which was halted five times by the Nasdaq for volatility, still ended the day up 38 percent, its best day ever as a public company. 

Its market cap jumped to nearly $28 billion before the paring the majority of its gains, at one point making it a bigger stock than 59 percent of the stocks in the S&P 500 in a sign of just how big the hype has grown for pot-related plays on Wall Street. 

Though the Street largely cited an interview with CEO Brendan Kennedy as the impetus for the initial buying, others said the move could be the result of a short squeeze. 

Tilray's trading volume hit 30 million shares, topping the stock's 30-day full-day average of 9.6 million shares. There are only 21 million shares of Tilray available for trading. 

Rival GW Pharmaceuticals rose 2.7 percent Wednesday while Canopy Growth fell 6.7 percent.

CEO Brendan Kennedy told CNBC's Jim Cramer on Tuesday that the world's largest pharmaceutical companies must start thinking about partnering with cannabis producers as a "hedge" against the space. 

"Cannabis is a substitute for prescription painkillers, prescription opioids, and so if you're an investor in a pharmaceutical company or you're a pharmaceutical company, you have to hedge the offset from cannabis substitution," the Tilray executive said Tuesday.

Kennedy argued that the same can be said for food and beverage companies. Aurora Cannabis has rallied 27 percent this week in Canadian trading after Canadian news service BNN Bloomberg reported Coca-Cola is in talks with Aurora to develop weed-infused beverages. 

The uptick in GW Pharmaceuticals stock followed a note from Morgan Stanley, which predicted that the company's new cannabinoid-based therapy will be "blockbuster." Analyst David Lebowitz reiterated his overweight rating on shares and his call for 24 percent upside over the next year.

Toronto-based Cronos Group, which cultivates and sells marijuana in Canada and Germany, rose 7.3 percent Wednesday. 

Quickly becoming one of Wall Street's most-followed stocks of 2018, Tilray posted its second-best day ever since its initial public offering on Tuesday after announcing approval from the Drug Enforcement Administration to import pot to the United States for medical research. 

The company's U.S.-listed shares jumped 29 percent in the prior session with 19 million of the company's 21.7 million floating shares exchanging hands.

Tilray said Tuesday that it will work with the University of California San Diego Center for Medicinal Cannabis Research to study the safety, tolerability and efficacy of marijuana for a neurological disorder. 

"Clinical trials build a halo around the brand. They inspire confidence and trust with physicians and regulators around the world and they give us data and information to talk to pharmacists and physicians that they just can't obtain from our competitors," Kennedy said. 

"The move in Tilray is beyond comprehension. No one needs a market pundit to explain that," Left said on Twitter Wednesday. "This is just the dynamic of trading low float stocks. Yes we are short and will hold a manageable position until rationality sets in."

Nearly 20 percent of Tilray's shares available for trading are sold short, according to FactSet estimates. That could help explain the recent jump in the stock's price as more traders are "squeezed" to cover their short positions by buying back the stock.


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