Looking back upon 2018, this was the year that many analysts, pundits, and investors alike thought would be a turning point for the cannabis industry. With Canadian legalization coming in Q4, many expected that markets would enter in a new “golden age” for cannabis stocks. However, it became quickly apparent that the reality was quite the opposite. Bearishness overtook the markets as companies both in the U.S. and in Canada saw share prices plummeting. with marijuana stocks globally plunged 20.3 percent in December.
Marijuana Stocks, as represented by the Global Cannabis Stock Index (which is run by New Cannabis Ventures) has seen drastic declines in December. Falling from an index price of 120 in mid-October to 64.02 as of December 31st, the decline represents the third consecutive month of losses and a total decline of 44.2% for the quarter.
While few companies were spared from the bearish decline, three stocks were able to see increases in December. Cronos Group (TSX: CRON)(NASDAQ: CRON) went up 13.6 percent. Cannabis Strategic Ventures (OTC: NUGS) and Auxly Group (TSXV: XLY) saw gains of 5 and 2.2 percent respectively during the month. Cannabis Strategic Ventures, however, ended up catching the attention of short-sellers earlier this year and fell 50.4 percent in spite the December comeback, so in the grand scheme of things still plummeted drastically.
The biggest losses of December included Terra Tech (OTC: TRTC), Weed Inc (OTC: BUDZ), Namaste Technologies (TSXV: N), and Invictus MD Strategies (TSXV: GENE), dropping 50.9, 45.3, 43.8, and 41 percent respectively. Terra Tech in particular saw itself suffer from a lawsuit for alleged fraud in its Nevada operations, and for the full 2018-year saw its stock plunged 90.3 percent.
Weed Inc, a company with a $110 million market capitalization despite having no revenue and just $2.8 million in equity, saw gains earlier this year but still dropped over 82 percent. Both Namaste and Invictus saw declines due to sudden management departures, as both companies’ CEO’s either abruptly departed or unloaded millions of shares.
In general, the Canadian market has been met with a bearish market response, which has been attributed to a few factors. Most notable is the relative failure for major providers to supply adequate cannabis to provincial bodies, which is one of the reasons why Canada is suffering from a major shortage at the moment. While private companies would rather cast the blame on how provincial regulators have distributed their licenses, the markets still remain skeptical.
Interestingly enough, Canadian companies supposedly fared better than their U.S. counterparts, with Canadian producers dropping 11.9 percent on average in December, while U.S. producers saw 18 percent declines. The recent passing of the Farm Act legalizing hemp in the U.S. has done little for share prices either, it appears. Even though many companies are now jumping into hemp cultivation as a source of CBD for a variety of products, U.S. cannabis companies seemed to have fared worse, at least in December.
Overall, 2018 was not the year that many expected it to be. With many investors seeing price drops over the last quarter that in many cases erased earlier gains from the previous three quarters, the sector seems to have a rocky road ahead of it – despite seemingly optimistic appraisals for future demand.