Canada’s largest cannabis producers have been whittled away on the public markets to a fraction of what they once were. The largest firm by market capitalization, Canopy Growth Corporation (WEED.TO), had a 52-week high of $76.68. At the time of writing, the stock sits battered at $25.67. Similarly, Aurora Cannabis (ACB.TO) saw a 52-week high of $16.24, and has since fallen to a mere $4.86 per share.
It is sobering to see the rapid decline in these companies’ valuations. At its peak, Canopy was valued at $23.97 billion. At the time of writing, investors have reduced the firm’s value to only $8.93 billion. Aurora has not fared much better. With a market cap hitting an all time high of $14.49 billion, investors have since put down their joints and the firm currently sits at $4.93 billion.
The Horizons Marijuana Life Sciences Index (HMMJ.TO) is an ETF that includes Aurora and Canopy. Its performance reflects the pain felt by the wider cannabis industry. It fell from $24.94 in September 2018 to its current price of $10.36. It is not surprising to see such pessimism from investors, as the largest firms have yet to become profitable. Aurora lost $0.16 per share (diluted) and Canopy $0.98 per share (also diluted), both in the quarter ending 2019-03-31. With 1.02 billion and 347.87 million shares outstanding respectively, these are some heavy losses for investors who are accustomed to flying high.
The loss is not felt exclusively by cannabis investors however; the entire S&P/TSX Index (GSPTSE) has fallen from 16,899.69 in September 2019 to 16,415.16 at the time of writing. While this does not bode well for most Canadian-listed firms, it particularly hurts cannabis firms, who have a strong need for capital.
The creation of new markets, such as the U.S. with their recent Agriculture Improvement Act of 2018 which legalizes hemp, is a huge opportunity for Canada’s producers who already have a strong production capacity. For example, Canopy was granted a New York license to produce hemp and has since acquired AgriNextUSA as an entry point to the new market. Another Canadian firm, Tilray, made a large asset purchase from LiveWellCanada Inc. for a unique product sourced from both the U.S. and Canada.
Constellation Brands, the parent firm who owns popular beverage maker Corona, made a $4 billion USD investment in Canopy, netting them a nearly 56% stake in the company. In their most recent quarter, Constellation expects to book a loss of $54.8 million solely in relation to their investment in Canopy. This shows how strong a stomach investors must have if they want to help build one of the most exciting new industries in Canada and abroad.
While we do not yet know the fate of these marijuana firms, we can say with certainty that their investors have so far experienced some groovy highs and some sobering lows.