Cannabis stocks had a triumphant Q1 this year, gaining most of the value they lost back in the previous quarter. However, the following quarter of 2019 wasn’t as positive for the industry as some of the hype behind the sector has died down with investors now expecting more solid fundamentals from the companies they give their money too.
Suffice to say, marijuana stocks have fallen significantly in Q2 2019, a trend that continued for the month of July. After gaining an impressive 57.4 percent in Q1 before losing 28 percent in Q2, global cannabis stocks fell by an additional 13.8 percent in July.
According to the Global Cannabis Stock Index, a collection of 52 international marijuana stocks managed by New Cannabis Ventures, the index has had a turbulent year. Overall, the index fell by 54.9 percent in 2018 before rallied 24.1 percent since hitting a low on December 24th.
Ever since the month of May, however, the index has lost steam and gone on to plummet significantly. This month ended up being the fourth consecutive monthly decline for weed stocks worldwide, falling by 13.8 percent overall.
Among the best-performing companies in the index, there were just four that gained by over 10 percent in July. The biggest winner was Neptune Wellness Solutions (NASDAQ: NEPT), whose shares have gone up 31.5 percent after a successful equity offering. Charlotte’s Web (TSX: CWEB) jumped by 20.5 percent after receiving a recommendation from a popular newsletter.
Scotts Miracle-Gro (NYSE: SMG) and Curaleaf Holdings (CSE: CURA) were the other two companies that saw double-digit increases, rising by 13.9 and 10.2 percent respectively over the course of the month.
In comparison, the biggest losers in the index far outweighed the winners. Not surprising to anyone who’s been following the news, the top loss in the cannabis markets this month has been CannTrust Holdings (TSX: TRST)(NYSE: CTST), whose shares have fallen by 53.2 percent after Health Canada found out the company was illegally producing weed.
Since then, it’s become apparent that this illegally grown marijuana has been sold international, a criminal offense under Canada’s Cannabis Act, as well as the fact that top executives were in on the scheme.
After both CannTrust’s CEO and Chairman had resigned from their positions, the company ended up gaining slightly towards the end of the month on news that they might consider a potential buyer to take them out of the public markets. However, the company very much appears to be a lost cause at this point from a investors point of view.
Coming in at a close second was Akerna (NASDAQ: KERN), whose shares fell by a flat 50 percent during the month, although the reasoning why this happened isn’t as clear. The stock imploded following news that they closed the acquisition of MJ Freeway as well as changing their name and stock symbol.
Other companies, like PharmaCielo (TSXV: PCLO) and Body and Mind (CSE: BAMM) both fell 37.6 and 33.2 percent, but in both of these cases there was no news to explain away this drastic decline. The last big loser in the index, TILT Holdings (CSE: TILD), dropped 32.2 percent, with the only other news from the company being the announcement of a $125 million debt note they were issuing to raise funds.
Time will tell how pot stocks will fare in August. The main positive going for the sector right now is the looming legalization of CBD-edibles and beverages in Canada later this year, which could potentially see a surge in prices for companies bringing these products to this market.
At the same time, however, last year’s legalization saw stocks plummet rather than surge, so investors and traders need to keep their eyes out and be wary of a surprise downturn in the markets once the new piece of legislation comes into effect.
