Marijuana News Today
The marijuana news today was short on breaking stories but big on pot stock market moves. Pretty much across the board, we saw significant share price decreases—about five percent on average among the pot stocks we usually track in this column.
There was no precipitating event that caused this, or at least no obvious one. Instead, what we saw was the general marijuana downturn beginning to cause some damage.
Remember that pot stocks had up to this point been huge winners in 2019. Then June hit and share prices began to fall, with July continuing that trend.
Still, I’m not overly concerned with the long-term ramifications of this downturn. We’ve seen pullbacks in the pot industry before and we will see them again. Every time, we’ve witnessed bigger gains on the other side.
The question is, of course, when this pullback will break. I believe we’ll begin to see gains return to the marijuana sector in autumn, possibly sooner.
What I know for sure is that excitement will begin to renew in the marijuana stock market once edibles are legalized in Canada, something that is set for December of this year. The closer we get to that event, the more I think investors will become confident in pot stocks again.
Right now, there simply hasn’t been any strong headlines from the pot sector; no big investments or major political wins. A few mergers and acquisitions helped spur a few stocks toward growth, but as far as industry-moving news goes, we’ve had little in the second half of 2019.
Still, I’m very bullish on the future of pot, today’s weak performance notwithstanding.
One of the few bright spots in the marijuana news today is Curaleaf Holdings Inc (OTCMKTS:CURLF, CNSX:CURA). Curaleaf stock was up nearly two percent in early-morning trading today, and finds itself breaking about even over the past five days.
While these numbers are certainly not going to blow anyone away, considering how poorly so many other stocks have been performing, that’s a very big win.
Speaking of wins, CURLF stock recently surged by 20% following the company’s purchase of Grassroots for $875.0 million in a cash-and-stock deal. (Source: “Cannabis Canada: How a U.S. company suddenly became the biggest pot firm in the world,” BNN Bloomberg, July 17, 2019.)
The deal, which will see the company become the largest marijuana producer by revenue in the world, helped spur investor interest. That goodwill was tempered, however, by the Food and Drug Administration (FDA).
The FDA recently sent Curaleaf Holdings President Joseph Lusardi a letter warning the company that its disposable vape pen, lotion, pain-relief patch, and tincture are considered drugs because the company’s marketing materials claim that those products treat conditions like ADHD, anxiety, and pain. (Source: “Curaleaf drops the most this year after FDA targets its CBD products,” Financial Post, July 23, 2019.)
“Selling unapproved products with unsubstantiated therapeutic claims — such as claims that CBD products can treat serious diseases and conditions — can put patients and consumers at risk by leading them to put off important medical care,” said acting FDA Commissioner Ned Sharpless.
He added that there are “many unanswered questions about the science, safety, effectiveness and quality of unapproved products containing CBD.” (Source: Ibid.)
The potential crackdown by the FDA sent Curaleaf stock plummeting, but that was only a brief fall, with shares leveling off quickly and investors coming back to support the stock.
This development speaks to the larger problem of the bizarre limbo that currently affects cannabidiol (CBD) products in the United States. Since hemp was legalized for cultivation earlier this year, the U.S. CBD market has for all intents and purposes been legal.
Having said, there are still a number of restrictions on the substance in the U.S., including against marketing CBD as a drug, which is what Curaleaf Holdings has been accused of.
Still, CURLF stock has been weathering this storm and is looking to make a bit of a bounceback, if today’s performance against the norm of the market is any indication.
One company that we should all be watching closely in the coming weeks and months is Canopy Growth Corp (NYSE:CGC). Canopy Growth stock lost nearly five percent in early-morning trading today, and is down about the same percentage over the past five days.
After having shed Bruce Linton as CEO, the company may very well enter an entirely new phase of its development. Gone are the days of high growth and expansion, or at least that appears to be the case. Now is the age of profit for Canopy Growth.
While I believe that to be a myopic business plan long-term, we may see gains come in the near future as the result of an emphasis on profitability.
A huge area of concern for CGC stock right now is who the company’s next CEO will be. That will reveal a lot about the direction of the company moving forward.
It will also be worthwhile to study Linton as he moves on from Canopy Growth. Whatever your thought of the guy, he is definitely well versed on the marijuana business.
The only other real bright spot in the marijuana stock market today—or at least not-dark spot—is Innovative Industrial Properties Inc (NYSE:IIPR). Innovative Industrial Properties stock gained a point in early-morning trading today, but is down three percent over the past five days.
I’ve been writing about this marijuana real estate investment trust (REIT) with increasing regularity as IIPR stock continues to be a strong point for the market.
I had predicted earlier that a downturn was likely in the cards for Innovative Industrial Properties stock; it had simply gained too fast. Still, I believe the stock will rebound from its current correction sooner rather than later.
Innovative Industrial Properties recently scored a resounding endorsement from institutional investors as a number of state pension funds included IIPR stock in their portfolios. (Source: “American public pension funds invest in cannabis through California-based REIT,” Marijuana Business Daily, July 25, 2019.)
That spoke to the REIT’s projected long-term stability and its dividend, which must equal 90% of the company’s profits.
All in all, I’m very bullish on IIPR stock.
One of the true horror stories of the marijuana market, CannTrust Holdings Inc (NYSE:CTST) continues to be battered on the marijuana stock market. CTST stock fell nearly seven percent in early-morning trading today, while it has dropped over 20% in the past five days.
CannTrust stock has been getting destroyed ever since Health Canada audited the company and suspended its license. The auditors came away with the conclusion that CannTrust was not following regulations.
The plot thickened when it was revealed that CEO Peter Aceto and Chairman Eric Paul knew about the regulation violations months in advance of the audit, leading to Aceto’s swift termination and Paul being asked to resign. (Source: “CannTrust’s CEO didn’t just lose his job, he likely lost $8.2 million in stock options,” Financial Post, July 29, 2019.)
CTST stock, while experiencing a little bit of a bounceback since then, is in a very bad place.
CURLF, CGC, IIPR, and CTST Stock Performances
The performances of CURLF stock (black line), CGC stock (blue line), CTST stock (red line), and IIPR stock (green line) over the past week are seen on the chart below:
Chart courtesy of StockCharts.com
The marijuana news today is mostly on the negative side, but that shouldn’t deter investors.
There are good things ahead for pot stocks post-correction. The key is to simply have patience and steel nerves; gains will once again return to pot stock holders.