Forget bitcoin -- marijuana remains the hottest viable investment opportunity on Wall Street. Rather than relying on intangible digital tokens, investors have witnessed the potential of the legal marijuana industry firsthand, which has been generating tens of billions of dollar a year in the black market for decades. With Canada having legalized recreational weed in 2018, and new markets moving toward a legalized environment with each passing year, the legal cannabis environment could prove very profitable to patient investors.

Depending on your preferred source, the marijuana opportunity is huge. Christopher Carey at Bank of America believes the weed industry could one day hit pie-in-the-sky annual sales figures of $166 billion, all while disrupting industries that currently sell $2.6 trillion worth of goods a year. On a more interim basis, cannabis cheerleader Cowen Group has called for $75 billion in annual worldwide sales by 2030, up from $12.2 billion in 2018.

An up-close view of flowering cannabis plants growing indoors.

Image source: Getty Images.

The buzz is strong with Aurora Cannabis

Among the dozens of pot stocks for investors to choose from, none tends to be more popular than Aurora Cannabis (NYSE:ACB). Even though Aurora is only the second-largest marijuana stock by market cap, behind Canopy Growth, it has an avid group of supporters among the millennial crowd. In fact, Aurora Cannabis surpassed tech giant Apple on free online trading app Robinhood as the most commonly owned stock.

Superficially, there are a lot of reasons to be excited about Aurora's potential. To begin with, it's unmatched when it comes to production capacity. As of its most recent quarter, management has forecast at least 625,000 kilos of annual run-rate output by the midpoint of 2020. That would be up from the more than 150,000 kilos it's producing on a run-rate basis as of March 31. With the exception of Canopy Growth, no other grower will even be within a stone's throw of its peak annual output. Presumably, this should make Aurora Cannabis a magnet for lucrative supply deals both domestically and abroad.

Speaking of looking abroad, Aurora also leads the industry with its international presence. Inclusive of its home market of Canada, it has a production or distribution presence in 24 markets. These foreign countries should come in particularly handy if and when dried flower becomes a commoditized and oversupplied product in the Canadian market.

Investors also appreciate Aurora's focus on the medical marijuana community in Canada and abroad. Even though the adult-use market has a considerably larger number of prospective customers than the medical pot market, medical patients tend to use and buy cannabis more often, and they're much more willing to purchase derivative products rather than dried flower. These derivatives, such as oils, edibles, topicals, concentrates, infused beverages, vapes, and so on, bear much juicier margins than traditional dried flower.

And lastly, supporters of Aurora Cannabis are fully expecting this market leader to strike a brand-name deal sometime in 2019. Having watched Canopy Growth receive a sizable equity investment from Constellation Brands, and Altria pump $1.8 billion into Cronos Group for a 45% nondiluted stake in the company, Aurora's shareholders are ready for their company's eventual deal -- especially after hiring billionaire activist investor Nelson Peltz as a strategic advisor in mid-March.

A businessman in a suit pressing the sell button on a digital screen.

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Pessimism is budding around Aurora

Presumably, it looks as if nothing could go wrong for the most popular pot stock. That is, until you take a closer look at the company's short interest figures.

According to data from Morningstar, 79.6 million shares were held by short-sellers (investors who want Aurora's stock to fall) as of March 28. However, by April 29, the number of shares short had surged to 88.57 million, or close to 9% of the company's outstanding shares.

Why have an additional 9 million shares of a clearly popular pot stock suddenly been bet against its success?

For starters, it's handily outperformed many of its peers this year, and as of mid-March had doubled on a year-to-date basis. Some short-sellers may be taking the opportunity to bet on a short-term pullback fueled by profit-taking. Since short-selling losses aren't capped, and there's a margin interest fee associated with betting against a stock, short-sellers tend to be oriented more toward shorter-term swings than making money by seeing a stock fall over the long run.

Another reason to be down on Aurora Cannabis is the company's income statement. Although Aurora has been selling and producing more marijuana, it's still losing a lot of money on an operating basis, if fair-value adjustments and one-time benefits and investment gains are removed from the equation. Despite a projected positive recurring EBITDA (earnings before interest, taxes, depreciation, and amortization) for the fiscal fourth quarter (April 1-June 30), operating profitability looks to be quite a ways off.

A Canadian flag with a cannabis leaf instead of a maple leaf that has the words Sold Out stamped across it.

Image source: Getty Images.

A third possibility for the increasing pessimism relates to Canada's multiple supply chain issues. A monstrous backlog of cultivation, processing, and sales licenses with regulator Health Canada has slowed the process by which growers have been able to bring product to market. Three of Aurora's top grow farms are still unlicensed for cultivation. Packaging shortages have also kept unprocessed cannabis sitting on the sidelines. All told, Canadian weed sales have trended far below initial expectations, and it's directly hurt major players like Aurora.

A fourth and final reason for the increased short interest might be (cue the sighs and eye-rolls) share-based dilution. Since Aurora hasn't struck a deal with a name-brand company in the food or beverage business, it's had to predominantly rely on dilutive forms of financing to fund its 15 acquisitions since August 2016, as well as its numerous organic projects. Each and every one of these deals and projects has been costly, leading to roughly 1 billion shares being issued by the company in less than five years. Despite Aurora's market cap soaring, its stock has gone almost nowhere since the beginning of 2018. Short-sellers might simply be counting on this increase in Aurora's outstanding share count to weigh on existing investors.

In short (pun intended), take heed that pessimism surrounding the most popular pot stock in the world is building.