Cannabis is increasingly profitable for the state. Legal sales continue to increase. But for producers-promoters of pot, it’s a descent into hell!
Shares of publicly traded marijuana growers have not been so depressed since pot was legalized in October 2018.
Truth be told, pot company titles are a shadow of their former self.
From October 2015, when Justin Trudeau first won, until the official legalization of cannabis in October 2018, which was among Trudeau’s flagship promises in 2015, the stock prices of cannabis companies skyrocketed.
At the time, many investors wondered if the stock market craze for cannabis producer stocks was just a smokescreen.
Now, almost four years later, the immense gains accumulated between October 2015 and October 2018 have gone up in smoke.
Here are some examples.
The market capitalization of Canopy Growth, the largest pot company in Canada, had reached the masterful value of 17 billion dollars on October 15, 2018, or 33 times its capitalization of October 2015. The share had risen from 2.18 $ to $73.75.
Today, Canopy (ticker symbol: WEED) stock is struggling to hold above the $4 apiece mark. The market capitalization is only $1.93 billion, down 89% since the start of the legalization of cannabis.
Number 2 at the time was the Aurora Cannabis Company. The stock had gone from 42 cents (October 2015) to $15.07 in October 2018. The company’s market capitalization had hit $14.5 billion.
Today, Aurora Cannabis stock is trading around $2.00. Its market value is only $816 million, a loss of 94%.
The other pot companies that were also “billionaires” when cannabis was legalized in October 2018 have all taken the field this year.
From $15.07 in October 2018, Cronos Group shares are currently trading at $3.94, down 74%.
Hexo’s stock is now worth only 27 cents a share, compared to a price of $8.95 in 2018. Market capitalization has shrunk by 94%.
For its part, OganiGram Holdings crashed 85%, with the stock dropping from $10 to just $1.43.
At Morningstar, what factors are attributed to the collapse of cannabis stocks in Canada?
The swing of the pendulum: the overflow of optimism in 2018 gave way to the bleak outlook for investors in the face of cannabis producers.
To a price war between pot growers.
To the tenacity of the illegal market.
According to a report by the Canadian Center on Substance Use and Addiction (CCSA), the legal cannabis retail market continues to grow as the public shifts from illegal to legal sources.
“While dried cannabis still dominates total sales, there is an increase in demand for other types of products, such as edible cannabis and extracts,” said the report.
In 2021, according to data compiled by Statistics Canada, retail sales of cannabis products were $3.8 billion, compared to sales of $2.6 billion in 2020 and $1.2 billion. dollars in 2019.
And in the first five months of 2022, sales continued to grow as they reached almost $1.8 billion, up 23% on 2021.
Meanwhile, the business of our government pot seller, the Société québécoise du cannabis (SQDC), is going very well.
For the year ended March 31, the SQDC reported sales of $601 million.
Selling pot pays big dividends for the state! Of these $601 million, Quebec collected $214.5 million in dividends and taxes of all kinds and Ottawa, the sum of $56.4 million in taxes.