Cannabis stocks plummet following Canada’s cannabis legalization

On the first day of legalization, cannabis stocks (not including Aphria) nosedived

Bethan Rose Jenkins, Cannabis News Writer/Editorial

Two of the biggest cannabis ETF’s descended sharply on Monday when Canada’s leading cannabis companies experienced losses of over 10 percent each.

The ETFMG Alternative Harvest ETF, the biggest U.S. cannabis ETF, dropped to $33.99, a 9.36 percent declineHowever, compared to some other cannabis stocks, it wasn’t the hardest hit. Horizons Marijuana Life Sciences ETF plummeted to $20.27, an 11.60 percent drop.

Shares of cannabis stock Aphria Inc. slumped more than any other on Monday, with the Canadian cannabis company’s shares dropping 13.83 percent to $15.77 in Toronto.

Publicly traded cannabis stock Tilray Inc. and HEXO, which recently signed a deal with Molson Coors Brewing to produce a range of cannabis-infused drinks, both sunk by 13 percent.

Why are cannabis stocks plummeting?

Concerns are being raised among cannabis retailers, who are worried that the Great White North won’t be able to keep up with demand. Current supply is not sufficient to meet the demands of Canada’s legal cannabis industry and many licensed producers have acknowledged the fact that they won’t be able to reach their full capacity for the first few months of legalization.

Paul Rosen, the chief executive officer of U.S. cannabis company investment firm Tidal Royalty, says that investors shouldn’t take the news of plunging cannabis stocks too seriously. He believes that drops in stock prices are to be expected due to the volatility of such a growing sector.

“The markets were just a little grumpy for macro reasons,” said the CEO, who is also the former CEO of Canadian cannabis company Cronos Group. “There’s no new bit of information that would’ve justified this sell-off.”

Cannabis stocks sunk on the first day of Canada’s cannabis legalization

While some industry analysts predicted that Canada’s legal cannabis industry would stabilize the cannabis stock market, their predictions have not materialized quite yet. On the first day of legalization, cannabis stocks nosedived. Last week, they started to rollercoaster again.

“It’s only day four,” Rosen added, as he drew attention to the fact that the cannabis stock market may not become stable for a few more months.

Cannabis industry investors should get used to volatile pot stocks performance, says Rosen. If investors want to reap the financial rewards in future, he says that they must be prepared to accept drops of 5 to 10 percent, at least.

“If the volatility or potential volatility is too stressful — there’s too much anxiety — please do not buy stocks,” he concluded. “Do not.”