By Eric Vengroff, Senior Financial Analyst
Cannabis stock speculators and investors threw up in their mouths a bit on Friday as the reality check on Tilray (TLRY:US) swept up the majority of the bigger stocks in the downdraft. At 3:15 PM EST, Tilray, the anomaly of the day, was down 26% to $130, Canopy (WEED:CA) was down $2.96 or 4.5% to $64.50, and Cronos (CRON:CA) down $1.54 or 8.7% to $16.20. Most others were up or down with one or two percentage points.
With legalization in Canada still just under four weeks away, the roller-coaster undulations may become more frequent and more violent as the doomsayers and the touters, optimists and pessimists, advocates and detractors battle it out for the hearts and minds of the money, whether it be serious investors or opportunistic speculators.
Uncertainties around the general state of the Canadian economy serve to complicate the calculus – look out for jumpers from higher floors if a NAFTA deal doesn’t get consummated. Canadians may have less budget for taxable, compliantly-packaged weed if they aren’t working. How will cannabis companies relatively miniscule sales in relation to their valuations perk up in a post-legal environment? David Prince, of Harbinger Capital Markets, attributes some of the wild swings to technology and flow of information, which causes markets to react more swiftly to news and trends. He likened the Tilray situation to Northern Telecom’s rise to orbital trajectory in August, 2000, exceeding CDN $1,200/share at one time. The small floats and high amount of stock subject to shareholder lockup only serve to magnify the swings that were less visible almost 18 years ago because Nortel was already an established business with largely free-trading shares – in Nortel’s case, because it made up such a large percentage of the TSE, everyone had to own it -until they didn’t. Sales and earnings for the pot companies that one can rely on may be quarters, if not years away. He says that’s when we’ll see some separation. Strap in for the ride.
The information and opinions presented here are that of the author and do not represent the thoughts and opinions of this website. The analyst does not own or represent any of the companies listed in this article and receives no compensation from any party mentioned in this article. Readers are urged to do their own research and due diligence and should seek advice from an independent financial advisor before making any financial investment.