Wait Longer for the Cannabis Rout to End

Investors who are betting on a cannabis rebound will have to wait longer. The rapidly falling stock market and looming liquidity crisis will force current cannabis investors to sell and to preserve their cash on hand. Fundamentals in the sector are not yet improving, either.

At Aurora Cannabis (TSX:ACB), the 12.16 million stock sale is hardly a vote of confidence. The penny stock still has a high market capitalization despite a failed business. Investors are left holding the back while the executive cashes in.

Canopy Growth (NYSE:CGC) said on Mar. 17 that it will temporarily close its Tokyo Smoke and Tweed retail locations in Canada. That customers may buy medical cannabis online is inconsequential. Besides, the demand for legal cannabis is too weak. The excess supply continues to weigh on product pricing.

In the medical cannabis space, Hexo’s (NYSE:HEXO) delayed filing is disconcerting. This suggests that the firm has extraordinary write-downs that will damage Q2/2020 results. For example, it may add additional disclosures that will confirm that its business model is broken.

For the sake of the industry’s survival, a bankruptcy filing by Hexo will benefit the strong players. Once this poorly run firm closes down, other firms may fill its void.