But Aurora also exemplifies the poor quality of weed stocks available to Robinhood investors. The company has ballooned its outstanding share count by more than 11,800% in a little over six years. It also wrote down around $2.8 billion Canadian in fiscal 2020 after grossly overpaying for its acquisitions and overextending its capacity.
This has been a year that Wall Street and retail investors won’t soon forget. Between the uncertainty tied to the coronavirus disease 2019 (COVID) pandemic and election concerns, equities have been whipsawed since late February. The iconic Dow Jones Industrial Average has logged 14 of its 16 biggest single-day point declines in history this year, as well as eight of its nine largest single-session gains.
In some ways, not being able to invest in over-the-counter stocks is good. Publicly traded companies listed on the OTC exchange are often penny stocks, or have failed to provide regular financial statements for investor inspection. But not all OTC-listed stocks are avoidable.
Short-term investors have flocked to online investing platform Robinhood
This is far from the only problem you’ll find in Robinhood’s highly popular investing platform. The biggest issue just might be that members are only allowed to buy stocks listed on major U.S. exchanges, such as the New York Stock Exchange (NYSE) and Nasdaq.
Image source: Getty Images.
Image source: Getty Images.
The U.S. has a considerably larger and more lucrative marijuana market than Canada. Even without federal legalization, California alone is outselling all of Canada on an annual basis. Yet Robinhood investors are incredibly limited in their ability to buy individual pot stocks focused on the U.S. market. Instead, they only have poor-performing Canadian pot stocks to choose from on major U.S. exchanges.
“The Big Short” investor Michael Burry unknowingly lit the spark that ultimately led to the GameStop frenzy last week.
The subreddit’s members spotted the opportunity for a “gamma squeeze” on the stock – buying cheap, long-shot options to force option sellers to buy GameStop shares to hedge their trades.
Planting the seeds
Burry’s Scion spent less than $14 million to amass 3.4 million GameStop shares as of April 2020, giving it a 5.3% stake that cost it about $4 a share on average, SEC filings show. The fund gradually reduced its position to 1.7 million GameStop shares worth about $17 million as of September 2020, its latest disclosure shows.
They also realized that GameStop’s low stock price, fewer than 70 million outstanding shares, and the fact it was one of the most heavily shorted stocks on the market made it a prime target for a “short squeeze” – bidding up the stock price so short-sellers need to buy the stock to cover their positions, sending shares even higher.
Given GameStop had $540 million in cash at the last count, he estimated it could buy back around two-thirds of its outstanding stock and still have plenty of money to invest in its business.