Today was a bit of a disappointing day for cannabis stocks, especially after some promising news came about last week that the U.S. had moved closer to taking cannabis off the Controlled Substances Act. Instead, America’s top health regulator warned consumers that cannabis compounds, specifically cannabinoids (CBD), could be dangerous.
The Food and Drug Administration (FDA) issued a statement on Monday which ended up sending pot stocks across the world plummeting. The agency issued a statement which, besides chastising companies for making positive claims about CBD in their products, also confirmed its stance on CBD itself as being a potentially dangerous compound. It went on to say that since there wasn’t enough scientific information in its eyes, the FDA couldn’t recognize CBD as being completely safe and that CBD could even be harmful under certain circumstances (such as impure/contaminated products, etc).
It was a disappointing piece of news for cannabis enthusiasts since many had hoped that earlier hearings might have convinced the FDA of CBD’s supposed health benefits. These include helping patients treat chronic pain symptoms as well as reduce overall inflammation, besides some of the more out-there claims, such as CBD helping to cure cancer. Although the FDA has approved one CBD-based drug, Epidiolex, which targets specific types of epilepsy in children, the agency hasn’t made any more pro-CBD rulings since.
“We remain concerned that some people wrongly think that the myriad of CBD products on the market, many of which are illegal, have been evaluated by the FDA and determined to be safe, or that trying CBD ‘can’t hurt.’ Aside from one prescription drug approved to treat two pediatric epilepsy disorders, these products have not been approved by the FDA and we want to be clear that a number of questions remain regarding CBD’s safety – including reports of products containing contaminants, such as pesticides and heavy metals – and there are real risks that need to be considered,” read a statement from the FDA.
At the same time, the FDA sent warning letters to 15 separate companies, cautioning them about making product claims with CBD that could be illegal. All of the companies mentioned are relatively small businesses that haven’t been noticed by most cannabis investors and hardly are worth mentioning. These companies have 15 days to respond to these warning letters and change things before legal action is pressed against these businesses.
Pot stocks across the board tumbled in light of this news. Aurora Cannabis fell by 6.7% in light of the news, while Cronos Group and Tilray fell by 2.3% and 2.5% respectively. Canopy Growth Corp fell by around 1.6%, while one of the biggest losers in the cannabis space was Charlotte’s Web Holdings, which dropped by 7.5% on Monday.
While some analysts have gone on to say that the cannabis industry is close to bottoming out and that many pot stocks have become potential value investments, it’s really uncertain how long it will be before the industry stages a recovery. Investors should be prepared to wait another quarter or two at the minimum to be safe before things get better.