Cannabis stocks took a battering in May although not quite the magnitude many Canadian stocks suffered late last year.
In October 2018, Canadian stocks plummeted – many by over a quarter – after the legalization of recreational cannabis. Many analysts put this down to profit taking with Patrick Morton of Cannabis Invest U.K. saying savvy investors ‘had bought the run and sold the fact’.
But, this fall was followed by a strong rally and the first-ever cannabis exchange-traded fund, the Horizons Marijuana Life Sciences ETF, advanced by more than 50%, in the first quarter of this year.
However, last month, most cannabis stock declines exceeded double digits – the Horizons fund was down 13% – with Canadian supply issues fingered as the chief culprit, according to the well-sourced Motley Fool financial website.
Losers League Table
The Major fallers in May included;
- Insys Therapeutics: Down 82%
- TILT Holdings: Down 36%
- Charlotte’s Web Holdings; Down 32%
- Tilray: Down 26%
- Harvest Health & Recreation: Down 23%
- Green Growth Brands: Down 23%
- The Green Organic Dutchman: Down 22%
Motley Fool commented: “It’s really not all that surprising that some of the bigger losses this past month were for companies like Aurora Cannabis, Canopy Growth, and Tilray, all of which have affirmed that Canada’s supply chain issues are hurting their top-and-bottom-line operating results.”
These supply issues were highlighted to CBD Testers by Jeannette VanderMarel co-CEO of 48North, which is currently planting one of the world’s largest cannabis farms in Canada in order to help alleviate these problems.
Canadian Supply Concerns Rock Market
She says one of the main problems has been the inability of Canada Health to develop a successful supply chain through its growing licence regime. But last month’s market volatility is not solely confined to the Canadian markets.
Motley Fool continues: “The beating that marijuana stocks took in May wasn’t just confined to Canada. U.S.-focused multi-state dispensary operators also took it on the chin, with those vertically-integrated companies that are furthest from profitability performing notably worse than those that have already achieved recurring profitability.”
It cites the example of Florida-focused Trulieve Cannabis, which its says was ‘more or less was par for the course with a decline of 14% in May’. They concluded: “It’s unclear where pot stocks will head next, but volatility is expected to be the name of the game for the time being.
Very Early In The Game’
Mr Morton says this level of volatility is to be expected at this stage of the industry’s global development.
“It’s very early in game. If it were baseball it would not be innings seven of nine, it would be the first or second, and those with a long term view recognise this as short term volatility. We are nowhere near the potential that this industry has to offer.”
This volatility of cannabis stocks is also deterring some companies from initiating their public listings. Grow Biotech, which advises medical-cannabis producers on their operations, has now pushed back plans for a stock-market listing in London.
Ben Langley, the chief executive officer of London-based Grow Biotech Plc, said in an interview with Bloomberg: “We don’t want to have our stock go up by 200 percent one day only to plunge the next.
“Frankly, we can grow our business exactly as we want to grow it right now without going to the public markets.”
Motley Fool commented: “It’s really not all that surprising that some of the bigger losses this past month were for companies like Aurora Cannabis, Canopy Growth, and Tilray, all of which have affirmed that Canada’s supply chain issues are hurting their top-and-bottom-line operating results.”
These supply issues were highlighted to CBD Testers by Jeannette VanderMarel co-CEO of 48North, which is currently planting one of the world’s largest cannabis farms in Canada in order to help alleviate these problems.
Canadian Supply Concerns Rock Market
She says one of the main problems has been the inability of Canada Health to develop a successful supply chain through its growing licence regime. But last month’s market volatility is not solely confined to the Canadian markets.
Motley Fool continues: “The beating that marijuana stocks took in May wasn’t just confined to Canada. U.S.-focused multi-state dispensary operators also took it on the chin, with those vertically-integrated companies that are furthest from profitability performing notably worse than those that have already achieved recurring profitability.”
It cites the example of Florida-focused Trulieve Cannabis, which its says was ‘more or less was par for the course with a decline of 14% in May’. They concluded: “It’s unclear where pot stocks will head next, but volatility is expected to be the name of the game for the time being.
Very Early In The Game’
Mr Morton says this level of volatility is to be expected at this stage of the industry’s global development.
“It’s very early in game. If it were baseball it would not be innings seven of nine, it would be the first or second, and those with a long term view recognise this as short term volatility. We are nowhere near the potential that this industry has to offer.”
This volatility of cannabis stocks is also deterring some companies from initiating their public listings. Grow Biotech, which advises medical-cannabis producers on their operations, has now pushed back plans for a stock-market listing in London.
Ben Langley, the chief executive officer of London-based Grow Biotech Plc, said in an interview with Bloomberg: “We don’t want to have our stock go up by 200 percent one day only to plunge the next.
“Frankly, we can grow our business exactly as we want to grow it right now without going to the public markets.”
