If you think restaurants or oil stocks have had it bad lately, you haven’t been paying attention to marijuana stocks, which have fallen off of a veritable cliff since the end of March 2019.
Although the long-term outlook for the cannabis industry remains promising — after all, tens of billions of dollars in weed sales are conducted in the black market each year — the near-term outlook isn’t so hot. Regulatory issues in Canada at the national and provincial level have created everything from product shortage to sizable supply bottlenecks, depending on the region. Meanwhile, high tax rates have made it difficult for legal producers in the U.S. to compete with illicit growers. And as the icing on the cake, North American pot stocks are struggling to gain access to traditional forms of financing.
Aurora Cannabis looked poised to be a marijuana leader…
A prime example of these struggles can be seen in the most popular stock in the marijuana space, Aurora Cannabis (NYSE:ACB). Despite the fact that Aurora is the most-held stock by a mile on millennial-focused investment app Robinhood, we’ve learned that popularity is no guarantee of profits over the past year. Since hitting its 2019 high in mid-March, Aurora’s share price has retraced by (drum roll) 92%!
Mind you, this was a company that, at this time last year, was touted as the leading global producer of marijuana and had access to more overseas countries than any other licensed grower. In theory, Aurora looked like it was in perfect position to outproduce its peers, as well as satisfy the medical cannabis needs of foreign markets via exports.
In March 2019, Aurora Cannabis also hired billionaire activist investor Nelson Peltz as a strategic advisor. Peltz, the founder of asset management firm Trian Fund Management, has keen knowledge of the packaged food and beverage industry, presumably making him the perfect person to orchestrate a partnership between Aurora and a brand-name food and beverage company.
Published: April 16, 2020
Founder & Interim Editor of L.A. Cannabis News