Hemp is becoming more and more profitable for the state. Legal sales continue to grow. But for marijuana producers-promoters, this is a descent into hell!
Shares of listed marijuana producers have not fallen this much since the legalization of marijuana in October 2018.
In truth, marijuana company names are a shadow of their former selves.
From October 2015, when Justin Trudeau first won, to the official legalization of cannabis in October 2018, which was one of Trudeau’s major promises in 2015, the share prices of cannabis companies skyrocketed.
At the time, many investors wondered if the stock market craze for cannabis stocks was just a smokescreen.
Now, almost four years later, the huge profits accumulated between October 2015 and October 2018 have evaporated.
Here are some examples.
The market capitalization of Canopy Growth, the largest marijuana company in Canada, reached a masterful $17 billion on October 15, 2018, 33 times its capitalization in October 2015. The share rose from $2.18 to $73.75.
Shares of Canopy (ticker: WEED) are struggling to stay above $4 a share today. The market capitalization is only $1.93 billion, which is 89% less than since the start of cannabis legalization.
Number 2 at the time was Aurora Cannabis. The share price rose from 42 cents (October 2015) to $15.07 in October 2018. The company’s market capitalization reached $14.5 billion.
Aurora Cannabis shares are trading around $2 today. Its stock market value is only $816 million, which is a 94% loss.
Other marijuana companies, which were also “billionaires” when cannabis was legalized in October 2018, have entered the battlefield this year.
From $15.07 in October 2018, Cronos Group shares are currently trading at $3.94, down 74%.
Hexo shares are now worth just 27 cents per share, compared to $8.95 in 2018. Market capitalization decreased by 94%.
For its part, OganiGram Holdings plummeted 85% and the stock fell from $10 to $1.43.
What factors does Morningstar attribute to the collapse in cannabis stocks in Canada?
The Pendulum Swings: A surge of optimism in 2018 gave way to a bleak outlook for cannabis investors.
To a price war between pot manufacturers.
To the vitality of the illegal market.
According to a report from the Canadian Center for Substance Use and Addiction (CCSA), the legal retail market for cannabis continues to grow as the public shifts from illegal to legal sources.
“While dried cannabis still dominates total sales, there is a growing demand for other types of products such as edible cannabis and extracts,” the report said.
In 2021, retail sales of cannabis products were $3.8 billion, compared with sales of $2.6 billion in 2020 and $1.2 billion in 2019, according to data compiled by Statistics Canada.
And in the first five months of 2022, sales continued to rise to nearly $1.8 billion, up 23% from 2021.
Meanwhile, the business of our state marijuana dealer, Société québécoise du cannabis (SQDC), is doing very well.
For the year ended March 31, SQDC reported $601 million in sales.
Selling marijuana pays off dearly for the state! Of that $601 million, Quebec collected $214.5 million in dividends and taxes of all kinds, while Ottawa collected $56.4 million in taxes.