On Oct. 6, President Biden ordered the Attorney General to “expeditiously” review the scheduling of cannabis, and promised to pardon all prior offenses of federal marijuana possession (Weed Between the Lines, “Tastes like Crow,” Oct. 13, 2022). It was very, very good news for the cannabis industry. And predictably, not long afterwards on Tuesday Oct. 18, some of the largest cannabis stocks on the market saw notable rebounds.
Shares of Cannabis Growth Inc. (CBC) jumped by 2.37%; Aurora Cannabis Inc. (ACB) jumped by .90%; Cronos Group Inc. (CRON) by .65%; and Tilray (TLRY) by .30%. It was a good day for marijuana investors.
But in the grand scheme of things, it’s nothing compared to what they’ve lost over the last seven years. Looking at the all-time history of those stocks shows the story in full, and it’s a classic tale of boom and bust.
Following the legalization of cannabis in Colorado and the creation of cannabis stocks like CBC, ACB, CRON and TLRY, things have been on the up and up. Investors probably thought they were headed to the moon. CBC, for instance, was created in 2014 and started at just $3.30 a share. By February 2017 it was $9.73 a share, and by Oct. of 2018 it was $56.89 a share.
It’s a similar story for ACB, CRON, and TLRY. ACB started in 2014 at $10.70 a share. By 2018, it was $128.26 a share. CRON started in 2016 at $0.24 and rose to $21.71 at its peak in 2019; and TLRY started in 2018 at $29.77, and in just three months it had risen to $148.30 a share.
The green rush was booming. The hype was high and ROI was climbing ever-higher. It was a good time to own stock and invest in cannabis.
Notably, there were three separate peaks for every one of those NASDAQ stocks between 2017 and 2020. You could almost overlay their all-time NASDAQ histories and see the same spikes in all four.
The first was in late 2017 and early 2018, and correlated with the recreational legalization of cannabis in California (the world’s sixth-biggest economy) and Canada (the world’s 10th-biggest economy). The second spike occurred in October of 2018, just prior to midterm elections during Donald Trump’s presidential term. The third occurred in March and April of 2019 just ahead of the 4/20 holiday, as legalization fever was sweeping the nation. That year Delaware, Georgia, Hawaii, Illinois, New Mexico, North Dakota and Texas all passed or ratified bills legalizing medical, or recreational cannabis or hemp.
The industry grew exponentially over those three years, and cannabis and hemp businesses were popping up everywhere, growing like weeds. Investment was as high as everyone’s hopes.
Then came what some might call “the bust.” When markets get saturated with businesses, competition increases, driving down prices — and profits. Since 2019, every one of those stocks has been on a downward trend that’s almost as steep as the one they rode up on (with the exception of a marginal boost that came from the 2020 COVID lockdowns).
Today CBC, ACB, and TLRY are all significantly lower than where they started. CRON is the lone outlier that’s maintained stock value higher than where it began at $2.91 a share — although it seems fairly evident the glory days are behind it.
Even with the boost all four of those stocks got this month, the overall picture is not looking as optimistic as it once did for cannabis. The hype over this new industry seems to be fading.
Maybe that means it’s time to invest. “Buy the dip,” as they say, and reap the rewards later. But even if Biden does reschedule cannabis before the end of his term, and even if that does result in another bounce in stock prices, the story will likely be the same. The market will continue to level out with normalization, and market saturation will continue to drive value down until an equilibrium is reached.