The past several months have been challenging for cannabis stocks. Every single month since April has seen major cannabis index’s either stay the same or decline, with around half of the months since then recording double-digit declines.
Now that legalization 2.0 in Canada is only a couple of weeks away, it’s clear now that investors aren’t as excited as they were last time in 2018. This lack of enthusiasm was apparent in cannabis stocks as a whole, with the sector declining by 18% in the month of September.
According to the American Cannabis Operator Index, a collection of major U.S.-listed cannabis stocks run by New Cannabis Ventures, cannabis stock as a group have fallen 17.9% in September, making it one of the worst months so far in 2019. The index, which started near the end of October with an assigned value of 100, fell to 70.64 in December. While cannabis stocks as a whole saw a dramatic turnaround in Q1 2019, this quickly subsided over the rest of the year, with the past three months alone seeing a 42.1% decline in the index.
Including in the index are 26 major companies, with 20 of them being multi-state operators while only 5 specialized only in industrial hemp production. Overall, only 4 of these 26 companies saw any gains in the month of September, while 17 saw double-digit declines. Nine of these companies lost over 25% of their market cap during the month.
The only major winner in the index was Sunniva (OTC: SNNVF), which surged 40% in the month. However, in August the stock lost over 60% of its total market value, so September’s rebound still leaves the small cannabis company at a negative. Trulieve Cannabis (OTC: TCNNF) gained by around 5 percent, coming in at a distant second.
In terms of major losers, there are quite a few. The biggest of which was TILT Holdings (OTC: TLLTF), whose stock fell by almost 60% in September. Coming in at second and third worst-performing companies in the index are SLANG Worldwide (OTC: SLGWF) and CV Sciences (CSE: CVSI), both of which fell by around 50 and 40% respectively.
The same decline was seen in Canadian cannabis stocks, with the Canadian Cannabis LP Index falling by 16.2% in September, slightly beating out its American counterpart. The fifth worst-performing Canadian cannabis stock was CannTrust Holdings (NYSE: CTST)(TSE: TRST), a pot producer which has now had its license revoked from Health Canada following the discovery of its illegal grow operations. While not the worst-performing stock in the index, CannTrust’s 35% or so decline follows the already steep losses it saw in August, which would easily make it one of if not the worst-performing stock over the past two months.
Overall, the excitement surrounding cannabis stocks seems to have faded. Just as was in the case with other exciting markets, such as cryptocurrencies back in 2018, the speculative excitement that used to exist has been replaced with the grim reality that building a business is hard work.
There’s still hope, however, that Canada’s 2.0 legalization later this month could reinvigorate the industry. Even if there is an upswing in the cannabis markets once CBD derivatives become legal in Canada, it doesn’t seem likely that such a recovery will be that major considering how poorly the sector has done over the past few months.