Big cannabis corporations are hitting a few financial roadbumps
For a while now, when bigger corporations look at cannabis, all they’ve seen is green — everybody is going after big investments with a goal of being the company on the spot when legalization hits (first in Canada, as it already has, and soon in the US, almost instantly creating two huge markets for the drug), and when they get those investments, they’re spending and growing and grabbing as much as they can to size up before the big wave comes. But recently, those fortunes are starting to turn a bit. MarketWatch has just reported that short sellers (people who buy stocks who aim to make money on them as they fall) are beginning to target some big cannabis stocks. Short sellers believe that huge cannabis companies like Canopy Growth and CannTrust Holdings are overvalued, and they’re positioning themselves to profit when a potential bubble pops.
And to be fair, cannabis companies haven’t helped the problem recently. CannTrust was recently found in violation of some growing restrictions, and has had 12,700 kg of cannabis in Canada placed on hold while an investigation ensues (that’s inventory reportedly worth $51 million). Canopy Growth just recently let its CEO go, and while that parting was reported as pretty genial, some troublemakers are joking that they’ll run a Twitter contest to fill the position instead. Canopy was not amused, apparently. And the legendary marijuana advocacy magazine High Times is trying to IPO at the moment, but the company’s COO has decided to leave right in the middle of the process. The IP is still set to go on as expected, but that can’t be a good sign for the company’s valuation.
None of these stories ring a death knell for any of these companies, but they’re definitely embarrassing roadbumps, no question. Cannabis is still on the rise, and while federal legalization in the US hasn’t happened yet, it still seems like we’re closer than ever (and when that happens, the money will really start flowing). But hopefully these companies can keep it together until then, rather than losing millions or even billions of dollars of valuation because they can’t keep track of what they can grow where, or hold on to C-level talent.