Several cannabis stock investors claim that the Bank of Montreal (BMO) is not allowing them to short cannabis stocks. The problem has been reported to be happening when investors want to short cannabis stocks using the bank’s self-directed brokerage. The information was released on September 5 by the Financial Post.
According to some BMO clients that invested in the cannabis industry claim they are not able to short these stocks though the bank’s InvestorLine brokerage. They were also not able to ask how to do so between Friday and Wednesday morning.
InvestorLine clients claimed that they tried shorting different cannabis stocks but they were not able to do so. During a conversation with an InvestorLine representative, one of the investors said that the bank informed that these stocks are too volatile.
Volatility seems to be the main issue regarding the problems faced by investors while trying to short these cannabis stocks. As the Financial Post explains, it didn’t matter whether clients had large sums of money or the account type they possessed. They were just not able to place the trade desired (shorting). Apparently, two of the four investors claimed the bank didn’t have enough shares in its inventory to be loaned out.
Nevertheless, the situation didn’t apply to institutional investors that are clients of the bank. Indeed, they were able to deal with these cannabis stocks on Tuesday morning. Moreover, advisors were also able to short cannabis stocks for their clients.
It is worth mentioning that the problem seems to be directly related to this bank rather than to the whole industry. There are investors working with other companies that appear not to have the same issues.
Ihor Dusaniwsky, managing director at S3 Partners, commented about it:
It’s expensive, but there are still shares out there. If you’re willing, there’s a way to short cannabis stocks.”
The cannabis sector has been expanding around the world and Canada has been a very important participant in the industry. There are other jurisdictions that are also starting to legalize medical marijuana and stocks are also reacting to the different realities experienced in different regions.
However, the cannabis stock industry has also experienced high volatility during the last year and some investors have also been concerned about the profitability of the sector. Users would have to search for new ways to be able to short these cannabis stocks if the BMO doesn’t solve this issue for retail investors.