Courtesy of CannTrust

Short sellers betting against weed stocks have lost nearly $200 million in February, according to data from S3 Partners , a financial-analytics firm.

On Tuesday, several major marijuana producers including Cronos Group, Aphria, Aurora Cannabis gained more than 6% - one day after Jefferies initiated coverage of stocks in the space.

That rally pummeled marijuana short-sellers with $213 million of mark-to-market losses in a single day, which more than offset their month's gain of $21 million.

Short interest of the top-10 most-shorted cannabis stocks declined in February as those with less conviction cut some of their exposure, the firm says.

Betting against marijuana stocks has been a money-losing game in February.

Short sellers of weed stocks, or those investors betting against these names, have seen $192 million of mark-to-market losses this month through Tuesday, according to data from S3 Partners, a financial-analytics firm.

On Tuesday, several major marijuana producers including Cronos Group, Aphria, and Aurora Cannabis gained more than 6% - one day Jefferies officially initiated coverage of cannabis stocks. That rally pummeled marijuana short sellers with $213 million of mark-to-market losses in a single day, which more than offset their monthly gain of $21 million, by S3 Partners' calculation.

Marijuana short sellers are focused on 10 stocks out of 150 cannabis-related securities, according to S3 Partners. In February, total shares shorted of these top-10 cannabis stocks declined by 4.2 million shares as those with less conviction cut some of their exposure, the firm says.

S3 Partners

"If losses for cannabis short sellers continue to mount we should see continued short covering and added upward price pressure boosting the profits of a growing community of long shareholders," Ihor Dusaniwsky, managing director at the firm said in a note out Tuesday. "With an average stock borrowing fee of 15%, short sellers will find it very expensive to hold onto short positions that are not adding positive numbers to their bottom line when the S&P and Nasdaq are up over 11% and 13% respectively. Eventually, there may be a short squeeze in several of these more shorted cannabis stocks." Now read: A Wall Street bank just started covering 7 marijuana stocks. Here's what it's saying.

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