What happened

Shares of GrowGeneration (NASDAQ:GRWG) were jumping 11.7% higher as of 11:26 a.m. EDT on Wednesday. The hydroponic gardening retailer didn't announce any news, so what's behind its big gain? One possible reason is that short-sellers could be covering their positions. As of Sept. 15, 2020, nearly 13% of GrowGeneration's stock float was sold short.

So what

If we're seeing the makings of a short squeeze for GrowGeneration stock, the main unanswered question is: Why? On the surface, there doesn't appear to be any reason for investors to suddenly think the company's prospects are better than they were earlier this week.

Cannabis plants growing under lights

Image source: Getty Images.

It's possible that short-sellers are afraid good news could be on the way for GrowGeneration. The company's CEO, Darren Lampert, is scheduled to participate in Jefferies' virtual conference panel discussing the cannabis ancillary market this afternoon. He'll also likely meet with institutional investors later today. Short-sellers could very well be worried that Lampert's remarks could provide a catalyst for the picks-and-shovels cannabis stock.

There's one fly in the ointment with this theory, though. Lampert participated in another virtual conference panel yesterday afternoon and had opportunities to meet one-on-one with interested parties. GrowGeneration's shares didn't move very much on Tuesday. 

All we can know for sure is that something has caused investors to buy GrowGeneration stock in relatively heavy volumes today. It might or might not be related to Lampert's virtual conference participation. Even if today's gains don't reflect a short squeeze, should GrowGeneration's momentum continue, a short squeeze could be on the way.

Now what

One key thing for investors to watch with GrowGeneration is the U.S. elections on Nov. 3. Should Democrats regain control of the Senate and Democratic presidential nominee Joe Biden win the presidency, the prospects of cannabis law reform at the federal level should improve. That could translate to good news for GrowGeneration.

Another important thing to look for with GrowGeneration is the company's third-quarter update, which will likely come later next month. If GrowGeneration's sales continue to soar, so will its share price.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.