“2019 has been a roller-coaster to say the least,” laughs Rich, referring to the major ups and downs of pot stocks in the last nine months.
It’s no secret that the cannabis industry has had a bumpy year. While there’s been plenty of maturation in cannabis—which includes several companies becoming revenue positive for the first time—there’s been a lot of scandal and a lot of downturn as well.
“A lot of people are jumping off. People are hitting the panic button and selling for a loss,” Rich says. “But I really want to go over what has happened this year, because it’s been a very interesting year for [pot stocks]. There’s been a lot of good things that have happened and a lot of bad things too.”
Pot Stocks: The Ugly
Rich notes that the biggest scandal in pot stocks throughout the year belongs to CannTrust Holdings Inc. (TSX:TRST) (NYSE:CTST).
In July, CannTrust was caught illicitly growing cannabis that it hid from Health Canada behind a fake wall in its Ontario facility. Over the next few months, the company was hit with class-action lawsuits, it publicly ousted two senior executives who had known about and had directed the illicit cultivation, and it had to report to Health Canada about the extent of its activity.
Just when things didn’t seem like they could get any worse for CannTrust, news broke on September 9 that the company had also let black market cannabis slip into its supply and be sold on the legal market. Then, ten days later, Health Canada revoked CannTrust’s license to produce cannabis.
“It put a black eye on the entire industry,” explains Rich. “[Pot] went from a illegal industry that was becoming legal, when one of the biggest players—a blue chip, can’t miss company—got caught selling illegal weed. We really haven’t recovered since that was announced.”
But that wasn’t the only bad news that pot stocks had to contend with this year.
Pot Stocks: The Bad
Rich cites the ousting of Bruce Linton from Canopy Growth Corporation (TSX:WEED) (NYSE:CGC) as another factor in the seven-month downturn that cannabis has suffered in 2019.
“We’ve got this company, Canopy Growth, that was a huge success story. It had a CEO that became a billionaire in a matter of five years, it went from $1.00 to $70.00 … they were the leader, the company that everyone was modeling themselves after, and then they made a deal with the devil.”
After negotiating a $5 billion investment from Constellation Brands (NYSE:STZ), Linton was forced out of the company that he’d built. Reportedly, this was because Constellation was unhappy with Canopy’s Q4 results, which saw it post a $323.4 million CAD net loss.
“Ever since, Canopy has gone from around $54.00 since the day he was terminated to about $30.00,” says Rich. “Clearly, in my opinion, it was a mistake and it hurt the cannabis industry.”
Luckily, 2019 wasn’t all doom and gloom for pot stocks.
Pot Stocks: The Good
“In January, February, and March we had a huge explosion, and we hit 52-week highs for the entire sector,” Rich explains.
That high came in March, when the Canadian Marijuana Index was at $110.67. This shows how profitable pot stocks can be when not dogged by scandal and corporate in-fighting. Potentially, it shows how high the industry can reach again.
What do you think? Can pot stocks rebound in the last few months of 2019? Are you still hoping for the resurrection? Let us know your thoughts in the comments below.
Featured image: DepositPhotos © Zamurovic