Is a Short Squeeze Brewing in Canopy Growth (CGC) Stock?


  • Canopy Growth (CGC) stock is surging today on what appears to be short squeeze interest.
  • The company’s short interest as a percentage of its float is sitting at around 15%.
  • In addition to tailwinds tied to potential U.S. legalization, there’s now a momentum trade in this sector.
CGC stock - Is a Short Squeeze Brewing in Canopy Growth (CGC) Stock?

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Among the unlikely winners that are once again seeing strong interest in today’s market, Canopy Growth (NASDAQ:CGC) is on a tear. Shares of CGC stock are up a whopping 25% in early afternoon trading, prompting questions of whether this stock is due for a short squeeze.

With short interest as a percentage of the company’s float sitting at about 15%, it’s clear many in the market are taking the other side of this move. That said, when a stock is surging in this magnitude, short sellers can see their trades blow up in their faces very quickly. This sort of spiral is what many appear to be betting on right now.

Fueling this fire is increasingly positive sentiment around cannabis rescheduling and legalization in the U.S. market. Canopy Growth notably announced plans to plans to enter the U.S. cannabis market via plans to launch Canopy Growth USA. This proposal was approved by a shareholder vote recently.

Let’s dive into these dynamics and see what to make of this move.

CGC Stock Surges on Short Squeeze Hopes

Given how far Canopy Growth has declined over the last year, it’s perfectly reasonable to assume some amount of short squeeze interest exists with this stock. Indeed, a 25% move on very high volume suggests some traders are getting blown up as we speak.

The stock’s short interest remained muted during its decline. That makes sense, as a given stock becomes riskier to short the lower it goes.

But with today’s rise, we’re seeing a surge of short interest once again. I’d expect that number to continue rising, given the bearish sentiment baked into investors’ minds, at least in recent years.

Of course, we’ll have to see if the U.S. legalization or rescheduling of cannabis takes place. For now, higher probabilities are driving interest across the board. That could, maybe, just be enough to drive a short-term short squeeze in this stock. We’ll see.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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