Cannabis investors continued to see bad news as market values of major cannabis stocks continued to fall. Casting aside any optimism that this bearish downturn would reverse, shares of marijuana companies took a big hit today, adding to what was already the worst week for the sector in nearly nine months.
Both the Horizons Marijuana Life Sciences ETF took an 11% dive today, while the ETFMG Alternative Harvest ETF dropped 8.7 percent. In combination with the previous week’s double-digit declines – which were already the biggest percentage declines since February 2nd, 2018 – investors are quickly becoming pessimistic about the Canadian cannabis market, with many preferring to invest in marijuana companies across the border that have largely avoided this bearish decline.
Aurora Cannabis (TSE: ACB)(NYSE: ACB) plunged over 16% today and was among the NYSE’s largest percentage decliners. Trading volume reached over 27.3 million, well above the full-day average 15.4 million. Overall, the companies stock plummeted over 44% in the past seven trading sessions.
Aleafia Health Inc. (CVE: ALEF) declined over 8.2 percent today, in contrast to its recent announcement that it was launching a research and development division. Cronos Group Inc (TSE: CRON), which previously announced a joint study with Aleafia regarding cannabis effects on sleep patterns, fell 11.6 percent today as well. Aphria Inc, Tilray Inc, Canopy Growth Corp, New Age Beverages Corp, and Green Organic Dutchman Holdings Ltd all plunged between 11-20% during Monday’s trading session.
One more notable example was India Globalization Capital Inc (NYSE: IGC), which saw it’s shares plunge so dramatically that it suspended immediately with regulators deciding to begin delisting proceedings. Before the stock price being halted for news, the price of shares had already plummeted over 81% over the past couple of weeks.
Another major loss was seen in Curaleaf Holdings Inc. The company, which made a private offering on Friday priced at $11.45, began trading on the Canadian Securities Exchange today and closed at $7.30, declining by 36 percent.
Some experts have worried that cannabis stocks would suffer once the haze of pre-legalization excitement passed. This, coupled with the fact that forecasted supplies wouldn’t be able to keep up with demand, has led to a pessimistic outlook from many investors. Already, many cannabis sellers across Canada are scaling back hours or even failing to make deliveries.
At the same time, broader markets have been tumbling, albeit not as extreme. The S&P/TSX composite along with the S&P 500 declined by 5-6 percent over the past couple of weeks as well.
Martin Landry, analyst of GMP Securities, cute his profit and sales estimate for Canopy Growth, adding that “The first 12 days of the recreational marijuana market have been disappointing from a distribution standpoint…We now expect that Canadian recreational sales will be more muted than expected in the near time,” according to The Globe and Mail.
At the same time, others have considered this kind of sector-wide downturn to be a reoccurring aspect of the market. Jason Zandberg of PI Financial Group said that “this is not the first sector-wide sell-off in the cannabis market – we have seen three other similar sell-offs since 2016.” Using Canopy Growth as an example, he mentioned that the stock tumbled over 39 percent for eight days in November 2016 but would hit a peak 11 months later. This trend repeated itself, with the stock declining by 43 percent over 19 days along with a separate 25 percent decline over 23 days in 2018.
With the downward trend showing no signs of turning around, investors are going to have a rough time over the coming weeks.
