Excerpt from Whitney Tilson’s latest email to colleagues entitled Largest short squeeze ever Tilray Inc. (NASDAQ:TLRY); our Seminar on Short Selling; NYC programs next week; Jim Chanos; Seth Klarman
Also see seth Klarman’s favorite 50 hedge funds
The largest short squeeze in history (in dollar terms) is happening right now in the case of Tilray (TLRY), a Canadian medical cannabis company. The stock is up more than 50% this morning because the CEO appeared on Mad Money last night. It’s just absurd – the company was only incorporated earlier this year, has a mere $28.1 million in trailing 12-month revenues, but now has a ~$22 billion market cap (yes, you read that right: it’s trading at more than 750x revenues)! It’s the ultimate speculative momo stock: the float is only 17.8 million shares (19.1% of the 93.1 million shares outstanding), yet more than 10 million shares traded in the first hour this morning! (On a regular basis, 100% of the float trades every day.)
But good luck trying to short it – the borrow (if you can get it) is in the range of 240-600% (the highest I’ve ever seen), and the options are crazy expensive. My best advice is to learn some lessons – mostly about the perils of short selling – and then ignore this stock. If you must short it, wait until it’s really cracked – say, under $100 (which could happen in a matter of days!) – and the momo herd has moved on. There will still be a ton of downside left (at over 300x revenues), but the borrow won’t be so expensive and the risks of a short squeeze will be much less.
Here’s Doug Kass’s wise take on it:
Another Short-Selling Lesson on Tilray (Part Deux)
Sep 19, 2018 | 8:05 AM EDT
Stock quotes in this article:
* Tilray is now a sideshow of classic speculative activity
* Neither go short nor go long TLRY
* Ignore TLRY and move on
Pot stock Tilray, Inc. (TLRY) is trading at $225/share (+$70 in premarket trading).
The short squeeze is reminiscent of Robert Wilson's legendary short in Resorts International. Indeed, in dollar terms, Tilray is now the largest short squeeze in history. (The interest rate on a TLRY borrow is over 260%, annually!)
The price action in Resorts, Tilray, Tesla (TSLA) (two years ago) , etc., are examples of why my basic and first tenet in short-selling is to avoid stocks with high short interest as a percentage of float and as a multiple to average daily trading volume.
I have learned this lesson the hard way and I have the scars on my back from that experience.
But this tenet has worked out well in my short strategy as I have avoided short squeezes over the last 10-15 years!
Tilray was featured in a segment on Jim Cramer's Mad Money last night. Brendan Kennedy, TLRY's CEO, seems to be a perfectly nice fellow. But do yourself a favor -- neither go short nor go long Tilray shares.
Both actions are gambling and not trading or investing.
This recommendation will save you a lot of money and aggravation.
My strong advice is take TLRY shares off of your stock monitor and move on from it -- your investment portfolio and emotional well being will be far better off for doing so.
Here is the tape of last night's Mad Money segment!
2) We had great fun teaching Tilray in the first webinar session this morning of our Advanced Seminar on Short Selling (click here for more info). It’s one of many historical and current case studies we teach, as we impart the many lessons we learned (sadly, often the hard way) in 15+ years of short selling.
use “VW10” for a discount!
If you do any short selling, you should take this seminar – and, I’d argue, you should even if you’re long only, as it’s invaluable to develop a skeptical mindset, learn how to identify value traps, etc.
It’s not too late to join the webinar (you can watch the video of the first session and participate live in the next two, which will be from 7:00-9:30am EST tomorrow and Friday), or we’ll be teaching it again via webinar on Nov. 14-16.
We’ll also be teaching it in person next Friday (Sept. 28) in NYC – contact me for details and special pricing.
3) Next week in NYC we’ll also be teaching our Lessons from the Trenches: Value Investing Bootcamp (Monday-Wednesday) and our one-day seminar on How to Launch and Build an Investment Fund (Thursday). See www.kaselearning.com for more information and, again, contact me for details and special pricing. We have special last-minute deals for students and young/emerging investors.
4) Michelle Celarier with a nice profile of Jim Chanos: How Jim Chanos Uses Cynicism, Chutzpah — and a Secret Twitter Account — to Take on Markets (and Elon Musk). Excerpt:
Jim Chanos runs Kynikos Associates, the lone short-selling hedge fund of any size — and the only one that that has been in business since 1985.
5) Speaking of legendary investors, here’s an article about Seth Klarman of the Baupost Group: Money Talks. Will the G.O.P. Listen? Excerpt:
Not two years ago, Mr. Klarman, a registered independent, was the biggest donor to the Republican Party in New England. According to The Boston Globe, during the Obama administration, Mr. Klarman gave more than $7 million to the party.