The financial world was set ablaze by the Reddit-inspired GameStop stock purchases that pit everyday investors against billion-dollar hedge funds. Wealthy hedge funds placed huge bets that video game retailer GameStop’s stock would decrease, so members of the Wallstreetbets forum (known as a subreddit to those that utilize the Reddit website) urged folks to purchase GameStop stocks, causing the price to skyrocket and costing hedge funds billions of dollars.
The entire Reddit vs. the Hedge Funds GameStop battle created quite the kerfuffle, especially when some brokerages like the Robin Hood app prohibited purchases of Gamestop. It was a whole thing and if you need an explanation, there the GameStop Short Squeeze Wikipedia page provides a breakdown. As I previously blogged, Canadian cannabis company Tilray was involved in a short squeeze itself. Several cannabis stocks have recently been publicized by the Wallstreetbets subreddit this week, sending the stocks up for a day, but then they tumbled back down.
While this Reddit-inspired rollercoaster-like adventure for cannabis stocks has some similarities with the GameStop saga, a big difference is that the cannabis industry is poised to have a brighter future, while video game stores are likely on their way out as the industry has moved online. While there is some gambling involved in trying to gauge when cannabis is going to be regulated federally like beer and wine and who the winners and losers will be, investors can, and should, do their due diligence in figuring out which companies have bright futures and which are more likely flash in the pans.
With cannabis will likely be in the news a lot over the coming years as piecemeal legislation gets passed, such as the SAFE Banking Act and speculation will arise if and when the House takes up the MORE Act again in an attempt to end cannabis prohibition at the federal level, cannabis stocks will probably be a volatile investment to own. However, to those that weather the storm and find the right companies that are poised to capture significant market share, the sky will be the limit. I’m no stock expert, so please do your research and listen to those that know a log more than me about the market, but it is apparent that opportunities will abound both short and longer term. Buyer beware and best of luck, investors.