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Why Tilray Stock Is Soaring Today

By Keith Speights - Apr 8, 2020 at 1:05PM

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A rising tide lifts all boats -- especially boats that short-sellers might be bailing out of.

What happened

Shares of Tilray (TLRY) were soaring 15.7% as of 11:31 a.m. EDT on Wednesday. The Canadian cannabis producer didn't announce any news, but its shares jumped amid an overall stock market rebound. Investors were optimistic after Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, stated that the situation should improve with the COVID-19 outbreak after this week.

So what

Dr. Fauci's statements were encouraging. If he's right, it's possible that life could soon begin to return to normal in the U.S. -- and probably in Canada as well. For Tilray, that could mean that retail cannabis stores in Ontario will reopen in the near future. It could also mean that Canada's cannabis derivatives market could pick up momentum. 

Blue gloved hand holding a cannabis leaf in front of a Canadian flag

Image source: Getty Images.

But there's a reason why Tilray's shares are rising significantly higher than most of the company's rivals' stocks are. Nearly 48% of Tilray's stock float is sold short. Any positive news can cause short-sellers to cover their positions, driving the share price up even more.

Now what

Marijuana stocks are likely to remain very volatile until it's clear that business is fully back in swing for the cannabis industry. Tilray's huge short percent of float will almost certainly cause higher volatility for its shares than for most other stocks. Any hint of bad news could result in Tilray stock falling just as quickly as it rose today.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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