The roller-coaster ride in the cannabis industry continued on Thursday as pot stocks that soared Wednesday on news of the U.S. rescheduling marijuana from a Schedule I to Schedule III substance would fall back down. Investors realized that that the plans weren't for a complete reclassification; it would only apply to certain drugs and products.
Tilray Brands (NASDAQ:TLRY), which soared by 14% on Wednesday when the initial news came out, would end up falling 12% on Thursday, with the stock nearly back to where it was before the news broke.
However, even if rescheduling were to take place, the main benefit would be a lower tax bill for U.S.-based cannabis companies. Tilray, which is based in Canada, wouldn't be able to suddenly enter the U.S. marijuana market. While rescheduling may be seen as a positive move towards loosening restrictions around the cannabis industry, by no means does it mean that legalization or anything close to it is on the horizon.
Oftentimes, however, Tilray's stock can jump on any positive cannabis-related news due to the initial excitement. The danger is in getting caught up in that hype because it can leave investors vulnerable to significant declines later on, when reality sets in. Tilray's business isn't all that strong. It has been struggling with not only profitability but even in being able to generate any consistent, organic growth.
Year to date, Tilray's stock is down 23%, and over the past five years, it has lost 96% of its value. This is an extremely risky stock that investors should be careful with.
