Cannabis Business Crashes Horribly
Cannabis companies have seen a great crash in the stock market this week. The share prices have plummeted by 40% after the blooming forecast for the industry.
Chief executive of Green Organic Dutchman Holdings Ltd. claims that the capital markets have run out. Their stocks experienced quite a blow at the start of the week, and the company has been reviewing financing alternatives to complete the construction of their facilities in Ancaster, Ontario, and Valleyfield, Quebeck. Growing worries over the latest wave of the vaping-related illnesses and a slow retail rollout have affected the cannabis stock negatively in the last few months.
In the meantime, Hexo Corp stocks fell by nearly 40%. The company is currently under investigation for suspected violations of federal securities laws. The investigation is concentrated on whether HEXO Corp misled their investors about the propriety of their business model, including the ability to sell their cannabis via various retailers. However, the company urges their investors to submit a loss form, so they could qualify for the recovery of their investment losses. Their preliminary Q4 2019 revenue results were almost 50% lower than previous guidance, which the company’s CEO attributed to lower than expected product sell.
Overall, the Canadian cannabis sector comprises five leading companies, whose total market value has dropped dramatically from approximately $40 billion in September 2018, to roughly $17 billion.
Investors are very pessimistic about the near-term outlook of the industry. There are companies that are producing far more cannabis than they are able to sell in a Canadian retail market that is held up by the slow pace of licensing stores of the government