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Tilray's short-sellers may be forced to surrender as losses increase, says S3 Partners

Number of shares shorted in Tilray stands at 3.35 million, some 32.5% of the float

Cannabis leaf and hundred dollar bills
Tilray is a Canadian cannabis company

Short-sellers of Tilray Inc (NASDAQ:TLRY) may have to give up on their bet company shares will go lower because losses are rising on an almost daily basis and could well be unsustainable, an analyst at S3 Partners who closely follows the short side of the market said Tuesday.

"Tilray shorts are down another $60 million in mark-to-market losses today (Tuesday), bringing year-to-date losses to $340 million," Ihor Dusaniwsky, managing director of Predictive Analytics in S3 Partners, told Proactive Investors in an email interview.

With those losses in mind, "we may eventually see short-sellers capitulate because their losses are too large to handle," he said.

Based on data compiled by S3, the short interest in Tilray on Tuesday stands at $333.44 million. The number of shares shorted is at 3.35 million, representing 32.51% of the float in the company. 

READ: Tilray stock rises after announcing deal to supply medical cannabis to critically ill Australian children

Dusaniwsky said he is not seeing "a technical reason" for a short squeeze in Tilray at this time.

"There are a small amount of recalls hitting the street, nothing that can’t be covered by the brokers and won’t demand short covering," he said.

Tilray rocketed to a record high of $300 per share, and the stock has become hotly contested between market bulls who believe legalization of cannabis next month in Canada would bolster the stock and those of other cannabis companies.

Then there are those investors who believe the stock is overvalued and the cannabis sector is ripe for sharply lower prices.

Dusaniwsky said stock borrow rates for those going short "have eased substantially to the 50% to 80% level, which is still very expensive but not anywhere near the 500%-700% fee levels we saw earlier" at the height of the Tilray rally.

Shares of Tilray were up 16% to $115.50 Tuesday afternoon. The session peak was at $119.40 with the day's low at $110.30.

Quick facts: Tilray Inc

Price: 19.93 USD

NASDAQ:TLRY
Market: NASDAQ
Market Cap: $2.01 billion
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