Pot Stocks Become Smoked

From Grizzle:

Pot Stocks Pummelled - Investors Dazed And Confused

The carpet has officially been pulled out from underneath ane of the largest bubbles inward global equities: Canadian marijuana stocks.

RETAIL INVESTORS GONE WILD

Euphoric retail punters stratospherically bid upwardly the sector over the final year, liberally opening their wallets to questionable management teams at fifty-fifty to a greater extent than questionable valuations. Investors had hoped that 2018 would hold out a ‘victory lap’ alongside the legalization of the Canadian recreational marketplace seat laid for the summertime — it has been anything but.

The Global Cannabis Index is off -44% from the peak inward Jan (see nautical chart below). The marketplace seat fully capitulated today alongside the iii largest producers downward significantly: Canopy Growth ($4 billion marketplace seat cap) – 12.0%; Aurora Cannabis ($3 billion marketplace seat cap) – 8.5%; as well as Aphria ($3 billion marketplace seat cap) – 9.9%.

GLOBAL CANNABIS STOCK INDEX

Source: New Cannabis Ventures

FUNDAMENTALS FOR MARIJUANA STOCKS ARE AS SKETCHY AS THE MANAGEMENT TEAMS

In early on February, Grizzle highlighted the risks inward our deep dive study – Up inward Smoke: The Overvalued Haze of Marijuana Stocks. We confronted the iii inconvenient truths most the sector:

1. Legalization of marijuana ever equals toll deflation – In every legal market, retail as well as wholesale prices peak close the appointment of legalization due to lack of render as well as hence apace laid out to fall, driven downward yesteryear novel entrants.

SPOT LEGAL PRICES

Source: New Leaf Data Services

2.  The dark marketplace seat is the biggest challenger for licensed producers – The marijuana marketplace seat is mature inward Canada alongside the black-market render already exceeding ask (Canada exported 20% of marijuana production inward 2017). Legal render volition convey to compete on a toll footing for marketplace seat share — the dark marketplace seat won’t magically disappear.

3.  Extreme valuations are reminiscent of the 2010 rare globe bubble. The bulls desire to believe marijuana is a manufactured as well as branded product. It’s not. Marijuana is a commodity as well as ever volition hold out (see Colorado, Washington, as well as California)....

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HT: ZeroHedge

Although the Grizzle story doesn't shout out it (nor ZH who should convey caught it), Barron's encompass story final calendar week may convey had something to hit alongside the spend upwardly inward the stocks:

Marijuana Stocks Could Be a Buzzkill
With its legalization of recreational marijuana afterward this year, Canada is pioneering a novel industry. Investors may desire to hold off for the smoke to clear.

H5N1 mutual depression temperature pelting trounce downward lately on the boarded-up cinder-block homes as well as empty factories of Smiths Falls, Ontario, melting the final snows inward this industrial town most an hr southward of Ottawa. One parking lot was full, however. Inside a shuttered chocolate factory, it is artificial summertime for the marijuana crop of the largest cannabis companionship inward the world, Canopy Growth.

In brightly lit, high-tech “grow rooms,” Canopy is preparing for the expected legalization of recreational cannabis this twelvemonth inward Canada—the get-go industrialized nation to hit hence at the federal level. Workers inward lab coats harvest, trim, as well as packet Canopy’s Tweed-brand products, hence shop them inward a giant vault whose heavy door would hit a banking venture proud.

It is a scene beingness repeated yesteryear companies across Canada, which wants to expire the Silicon Valley of recreational pot.

Canada’s experiment is beingness closely watched yesteryear other countries, including the U.S., where federal constabulary silent classifies marijuana equally an illegal narcotic, simply where to a greater extent than than one-half of the states allow prescription sales as well as ix convey legalized recreational use. The visitor log at Canopy’s Smiths Falls facility shows delegations from dozens of countries.

As they oftentimes do, investors convey celebrated this emerging concern early on yesteryear embracing Canadian companies that claim a cannabis connection. Traveling inward Canada, cabbies, bankers, as well as fifty-fifty border guards volition tell you lot their favorites inward a bubble that has floated Canadian cannabis stocks to a collective stock-market value higher upwardly $30 billion. That’s already most one-half the marketplace seat capitalization of Canada’s aureate mining industry....MUCH MORE