Has the Cannabis Stock bubble popped?

Seems like the Investors’ honeymoon with the ‘new green’ is over… at least for now

Faisal Khan
Sep 24, 2019 · 3 min read

The Cannabis craze kicked off last year when Canada of officially legalized Marijuana in October 2018. The excitement was centered around the spillover effect that this move would have with a huge market down South in terms of consumption & investment. While the federal law in the United States still prohibits the use of Marijuana, 33 U.S states have legalized it in some way.

A dozen of these States have granted full legalization — which includes recreational use. The confusion over contradictory federal-state laws still muddies the environment. Having said that, there is no law which prevents American citizens from investing in Cannabis-related companies. As money flew into Cannabis stocks being publicly traded on the major stock exchanges (TSX, NSYE, Nasdaq), their prices soared.

Today’s infographic (below) depicts the rise & fall of the Cannabis stock prices ever since their IPO (Initial Public Offering). The graph is divided into three columns with a different colored line for each of the 10 major companies. The left column is the price of the stock when it first started trading, the middle column showing the peak it reached & finally the third column shows the stock price on September 13th, 2019. The data was collected from Yahoo Finance.

Some of the key observations & takeaways are as follows:

The data below shows the IPO price followed by the current stock price at the close on 09/24/2018, with the peak price reached in the end. The percentage in the bracket is the net return so far from the individual stocks of these companies.

It is evident from the data that 5 out of the 10 companies have crossed into the negative territory now. GW Pharma remains on the top with 1230.27 % returns while Aurora Cannabis & Aphria have shown impressive returns of 114.41% and 25.93% respectively.

However, the rally of 2018 has fizzled out as the data suggests. Analysts are also predicting that the big cannabis companies will continue to lose money going into 2020 with supply-side issues & aggressive expansion into international markets. Also the recent vaping related deaths have created an air of caution for the investors who were riding high on the marijuana legalization boom.

As things evolve and settle down after the initial euphoria & external shocks, and a legal framework for recreational & medicinal use takes shape, so will the prices of the cannabis stocks.


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Faisal Khan

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Content Specialist in Cryptocurrencies | Blockchain | Financial Markets | Technology | Future | Science | Space

Technicity

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