Marijuana producer Tilray sank on Monday after a hedge fund announced it opened up a short position in the company.
Chris Brown, a partner at the long-short firm Aristides Capital, said his firm is targeting Tilray at the Kase Learning Short Selling Conference in New York on Monday.
"This is definitely commodity business," Brown said, referring to the nascent marijuana industry. Brown said the price of raw marijuana would come down over time, and "come down aggressively."
The Nanaimo, British Columbia-based producer sank $6.55, or 2.7%, following Brown's presentation.
Tilray did not immediately respond to a request for comment.
Aphria, another Canadian marijuana producer, sank as much as $1.31, or 30%, before recovering slightly on Monday after short seller Gabriel Grego, the founder of Quintessential Capital Management, said the company was a "black hole" earlier at the conference.
Tilray and other marijuana producers have been the target of short sellers before.
Andrew Left, who gained notoriety for shorting the pharmaceutical company Valeant, opened a short position in both Tilray and the marijuana producer Cronos Group in August through his firm, Citron Research.
Left is building out a fund to focus on long and short plays in the cannabis sector.
In October, TD Ameritrade warned retail investors to steer clear of the often volatile sector.
"The marijuana and cannabis industry — sometimes referred to as the Wild West of investing — is littered with high-flyers, potentially over-valued companies, and even scams," the stock brokerage firm said in a three-minute video posted on its Youtube account.
Bradley Saacks contributed reporting.
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