Since earlier this month, when marijuana stocks hit their first 52-week low, Rich has been talking about the unique buying opportunities presented by the summer slump.
Now the pot indexes in both the US and Canada have found new floors, tumbling yesterday to $80.69 and $70.51 respectively. In his newest video, Rich talks about the recent news that’s causing this downturn in the sector, and what investors should know about marijuana stocks in general.
“We are having a serious crash of epic proportion,” says Rich.
Curaleaf Responds to FDA Letter
Yesterday, the United States Food and Drug Administration issued a letter of warning to US-based Curaleaf Holdings, Inc. (CSE:CURA) (OTCQX:CURLF). The letter alleges that the company has been illegally selling unapproved products containing cannabidiol (CBD) online. The FDA further slammed Curaleaf for allegedly providing unsubstantiated claims that the company’s products could treat cancer, Alzheimer’s, opioid withdrawal, pain, anxiety, and a host of other conditions and diseases.
Curaleaf was given three weeks to respond to the letter, but the company wisely wasted no time addressing it publicly.
“Curaleaf is committed to the highest standards of quality and compliance, and will work collaboratively with the FDA to resolve all issues addressed in the agency’s letter,” read a statement from the company released just hours after news broke.
“We can affirm that nothing in the letter raises any issues concerning the quality and consistency of any Curaleaf product or calls into question the high safety standards of the Company’s cultivation and manufacturing processes.”
The company’s stock fell from just under $7.98 to $6.85 a few hours after the letter was announced. It has since stabilized around $7.25, but Rich says the news has hurt other marijuana stocks as well.
“How can Curaleaf, one of the biggest—if not the biggest—cannabis company in America make these [health] claims?” Rich asks. “This is mind boggling for me, and I believe the entire sector went down based on this news. And we’re only a few months from CannTrust making their scandal.”
Can CannTrust Be Trusted?
Of course, Rich checks back in with CannTrust Holdings (TSX:TRST) (NYSE:CTST), a company that’s been dealing with its own scandal for weeks. The company’s stock fell dramatically when Health Canada put a hold on 5,200 kgs of cannabis grown in rooms that were not licensed for growing.
“This stock has fallen off a cliff,” Rich says, noting that CannTrust went from $6.50 a share before the scandal, down to $2.75 today. “People keep saying they want to buy it, I keep saying don’t buy it.”
The most recent news from CannTrust is that the executives allegedly knew about the unlicensed cannabis being grown, and had constructed fake walls to hide it from the regulators. Whether this news is true or not, the rumor has caused CannTrust’s stock to continue plummeting.
Rich also reminds his community that less than a week ago he was saying that scandals such as the ones that Curaleaf and CannTrust now find themselves in will occur with greater regularity as the “wild west of weed” begins to adjust to legalization. Scandals will also continue to occur as regulatory bodies like Health Canada and the FDA begin cracking down on the cannabis companies that aren’t complying with the rules.
Still, as a sector that was once illegal and is now legal, volatility is to be expected. It’s this volatility that allows traders in marijuana stocks to make their money.
What do you think? Has the sector found its new bottom, or will prices continue to fall? Let us know down below.
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