Feb 28, 2019

The looming marijuana short squeeze

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Data: S3 Partners; Chart: Chris Canipe/Axios

The marijuana industry has quietly been having a very strong 2019, and it could push even higher.

The big picture: The nascent industry has drawn an outsized share of short sellers who are betting the stocks will fall in value. Short sellers, by and large, say they are not bearish on the business, but believe the companies' valuations are wildly high, making them good short bets.

  • Tuesday's reefer rally, however, has put short sellers in a position where they'll need to double down or bow out of their positions.
  • Canadian marijuana company Aphria announced a deal to produce and sell medical cannabis patches developed by scientists at MIT, and Aurora Cannabis announced an expansion into Portugal.

Details: Shorts had been up $21 million in mark-to-market profits, but headlines Tuesday of new breakthroughs poised to boost the industry pummeled them with $213 million of mark-to-market losses. They are now down $192 million for the month and $1.78 billion for the year, according to S3 Partners managing director of Predictive Analytics Ihor Dusaniwsky.

  • The ETFMG Alternative Harvest ETF has risen 47.5% year-to-date and the Horizons Marijuana Life Sciences ETF is up 51.5% on the year.
  • "If losses for cannabis short sellers continue to mount, we should see continued short covering and added upward price pressure boosting the profits of a growing community of long shareholders," said Dusaniwsky.

The bottom line: Short sellers borrow stock with the intention of buying it later at a lower price and pocketing the difference. But with an average stock borrowing fee of 15% and mounting gains in the cannabis sector, it's getting very expensive to hold onto short positions.

Go deeper: Sin industries like marijuana and sports betting could shine in 2019

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Making sense of the UN's climate conference coronavirus delay

Illustration: Sarah Grillo/Axios

The scuttling of November's pivotal UN climate conference is the starkest sign yet of how coronavirus is throwing a wrench into efforts to combat global warming. But like the wider relationship between the coronavirus and climate initiatives, the ramifications are ... complicated.

Driving the news: UN officials announced Wednesday that the annual summit to be held in Glasgow, Scotland, is postponed until some unknown time next year.

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 9 a.m. ET: 952,171 — Total deaths: 48,320 — Total recoveries: 202,541Map.
  2. U.S.: Total confirmed cases as of 9 a.m. ET: 216,722 — Total deaths: 5,137 — Total recoveries: 8,672Map.
  3. Stimulus updates: Social Security recipients won't need to file a tax return to receive their checks.
  4. Jobs update: 6.6 million people filed for unemployment last week, a staggering number that eclipses the record set on March 26.
  5. Health updates: The Trump administration won't reopen enrollment for ACA marketplaces this year.
  6. National updates: The Grand Canyon closed after a resident tested positive for coronavirus.
  7. World update: Israeli Prime Minister Benjamin Netanyahu re-entered self-quarantine after his health minister tested positive for coronavirus.
  8. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  9. Other resources: CDC on how to avoid the virus, what to do if you get it.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.

The weirdest NBA draft ever

Table: Axios Visuals

The 2020 NBA draft was already shaping up to be the weirdest draft in years, and now that the coronavirus pandemic has disrupted the sports world, it could be the weirdest draft ever.

Why it matters: While most drafts have a clear hierarchy by the time April rolls around, this draft does not. There's no reliable No. 1 pick, almost every top-10 prospect has a glaring weakness and the global sports hiatus has shrouded the whole class in mystery.

Go deeperArrow43 mins ago - Sports