For much of the past half-decade, marijuana stocks were among the hottest investments on Wall Street. Investors who were able to stomach the industry's early-stage volatility were treated to gains that occasionally topped 1,000% as of 2018 and early 2019.
But over the past 14 months, the cannabis bubble has undeniably burst. While the industry still sports incredible long-term growth prospects as it transitions tens of billions of dollars in black-market cannabis sales over to legal channels, it's dealt with major supply issues in Canada, high tax rates in the U.S., financing issues throughout North America, and more recently, the coronavirus disease 2019 (COVID-19) pandemic.
In some instances, the washout in cannabis stocks has presented an opportunity for long-term investors to load up. But for certain pot stocks, even minor rallies have been met with increased resistance by short-sellers (i.e., investors who make money when a stock's share price declines). Between the end of April and the end of May, short interest rose notably for three of the most popular marijuana stocks.