The same Reddit group responsible for GameStop's sudden stock surge has set its sights on weed stocks, boosting them to a multi-year high for one day before they crashed again.
Last month, investors from Reddit's /r/WallStreetBets forum made headlines by buying up massive shares of GameStop stock, costing corporate Wall Street hedge funds billions of dollars in losses. This month, the group focused its investment efforts on cannabis industry stocks, leading to one of the most volatile weeks in weed stock history.
Cannabis stock prices have been rising sharply since January, when the Democrats gained control of the US Senate. Senate Majority Leader Chuck Schumer announced that cannabis reform would become one of his top priorities this year, kicking off another wave of weed industry investment. It is currently illegal for American weed companies to trade on the US stock market, but federal legalization would end this restriction, opening up serious investment opportunities for the cannabis industry.
After Schumer’s announcement, the CEOs of the largest weed companies told their investors that the impending end of federal weed prohibition would bring them incredible profit. David Klein, CEO of Canopy Growth, told investors that he expects to see Congress decriminalize cannabis by the end of this year. Tilray CEO Brendan Kennedy was even more optimistic, telling investors that he expects the US to completely legalize adult-use cannabis within the next 12 to 18 months.
Last week, Reddit investors decided to put their money into this growing industry, and by last Wednesday, cannabis companies saw their share prices hit record highs. Leading pot firms, like Tilray, Canopy, and Aphria, saw massive gains, while exchange-traded funds (ETFs) like Global X Cannabis, ETFMG Alternative Harvest, and Amplify Seymour Cannabis grew to become the best-performing ETFs of 2021.
The boost didn't last long, though. By Thursday, the momentum for these investments dried up, and weed stocks began crashing. Tilray's share prices plunged by a massive 48 percent, Aphria lost 33 percent, and Cronos, Canopy, and Aurora Cannabis all lost about a quarter of their market value. Canadian cannabis firm Sundial Growers had one of the wildest rides, with its shares spiking 79 percent on Wednesday, then dropping 19 percent on Thursday.
The quick reversal of fortune for these stocks indicates that the weed industry will not be able to count on Reddit to provide a sustainable boost in their share prices. But even with these massive losses, weed stocks are still up overall. Tilray's market share is still 421 percent higher than its last year-to-date earnings report, despite the steep decline at the end of last week.