Cannabis shaped chocolate cookies at the Cannabis Expo in Sandton, South
Africa, on November 29, 2019. PHOTO | MICHELE SPATARI | AFP
Like with Bitcoin, volatility among pot stocks — publicly listed
companies dealing with marijuana products — have left investors
literally reeling.
Buoyed by Canada
and several US states legalising the recreational use of marijuana in
October 2018, speculators rushed for the green gold at the Toronto and
New York stock exchanges in full force early 2019.
The
good times were not to last and most of the cannabis-based stocks are
now trading at less than half the price they commanded in the first
quarter for the year.
To blame,
according to analysts, were bullish projections that took the rigours of
distributing recreational edibles in addition to medicinal gummies,
mints and vapes in a tightly regulated value chain for granted.
The
projections also did not factor in the resistance by the cannabis black
market to join the mainstream where regulations meant the potency of
the raw stuff was compromised.
According
to Statistics Canada, cannabis sales in the first year of legalisation
totalled $908 million, almost a fifth of the $4.34 billion estimated by
Deloitte before the legalisation. Medical use of marijuana has been
legal in Canada since 2001.
Funds that track cannabis stocks say they are down more than 50 per cent since they hit peaks in March this year.
Two
of the top listed industry players — Canopy Growth and Aurora Cannabis —
disappointed investors, missing both analyst revenue and profitability
forecasts. Canopy undershot revenue by 40 per cent and profitability by
140 per cent, and Aurora’s revenue fell by 24 per cent on a quarterly
basis.
Tilray’s was the exception,
with higher than expected revenues despite its unhindered cash flows and
losses being worse than expected.
Canopy
Growth and its Canadian rivals — Supreme Cannabis Co and Aphria Inc —
are active in Lesotho, where MG Health is the leading producer. Supreme
Cannabis last year acquired 10 per cent of MG Health’s Medigrow Lesotho
for $7.6 million, targeting to export medical cannabis oils to Canada.
Investors
are attracted to Lesotho where the production per gramme of cannabis is
$0.93 compared with $1 in other countries. The country, however, faces
competition from other low cost producers like Colombia and Jamaica.
The
retail prices of cannabis differ widely by region, depending on potency
and the restrictions, but Mauritius, Gabon, Eritrea, Zimbabwe and the
Gambia were the most expensive in Africa with prices ranging from $9.9
per gramme to $1.0 per gramme.
These
were, however, still a fraction of the prices in the Caribbean, with
Bermuda topping at $124.1 per gram, Dominica’s at $32.5 per gramme and
Montserrat at $25.1 per gramme.
Still, up to five companies are expected to list in 2020 including Emmac — a London based medicinal cannabis firm.
On
November 28, a spokesman of Emmac, which took over GreenLeaf, a French
hemp and cannabis healthcare company and Switzerland’s Blossom, was
quoted as saying going public remained an option.
The potential for listings, however, is dependent on demand for both medicinal and recreational cannabis growing.
Investors
and issuers alike are keeping an eye on the US, where more than 10
states could be holding a referendum with the November 2020 elections on
legalising marijuana use in some form.
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