The $ 10 billion annihilated: what disturbs investors while the shares of the pot undergo the worst day of 2018

Available now: Cannabis Professional, the authoritative e-newsletter, specially designed for the rapidly evolving cannabis industry professionals. Subscribe now.

Investors continued to flee cannabis, making Monday the worst day of trading marijuana stocks in 2018.

The Horizons Marijuana Life Sciences ETF lost nearly 12% on Monday, the worst drop in a single day in its history, and this is only the second time that units have fallen to double digits in one session. Launched in April 2017 and recognized as having surpbaded the $ 1 billion mark of badets earlier this year, the ETF dropped below $ 900 million in badets on Monday. He lost $ 225 million in a week.

Nearly two dozen major jar stocks plunged into double-digit proportions at the end of Monday's trading.

Tilray Inc., the most profitable cannabis company in terms of market capitalization, fell by 15.6%. Canopy Growth Corp. and Aurora Cannabis Inc. fell by about 11% and 12%, respectively.

Losses in Supreme Cannabis Co., Green Organic Dutchman Holdings and Newstrike Brands Ltd. have all exceeded 14%.

Monday's rout has erased nearly $ 10 billion in market value from the 62 shares of the Solactive North American Marijuana Index, based on the Horizons ETF, according to S & P Global Market Intelligence.

"We have not seen any news explaining this sale," said Russell Stanley, a cannabis stock badyst at Beacon Securities Ltd., in an email to the Globe and Mail. Despite the good news of strong Canadian demand that began last week, "investors can now wonder" what's next? "For the Canadian market," he said.

The debt rating agency, DBRS, issued a report on Monday, which noted that "while the development of the sector could benefit all [licensed producers]all will not work the same way and many will fail. "

Jason Zandberg, a cannabis stock badyst with PI Financial Corp., says recent comments by the Conservative leader complaining of the Liberal Party's implementation of decriminalization have contributed to the decline. "I think Andrew Scheer's comments about not committing to legal cannabis have weighed heavily on the cannabis market. We believe that reverse legalization is bad policy and that it is extremely unlikely. "

Mr. Stanley, of Beacon, notes that the new lower stock prices have resulted in multiple lower but still high earnings prices. The companies it tracks are now trading at 36 times the consensus consensus for EBITDA in 2019, or earnings before interest, taxes, depreciation and amortization. That's 20% of the 45-fold closing of last Thursday, but twice the 12-month average of 18 times EBITDA, he said.

Monday's losses contributed to the sector's weakness since the legalization of cannabis in Canada on Wednesday. But the decline seemed to affect all businesses, whether concentrated in Canada or the United States, which legalized marijuana for recreational purposes.

Of the 62 shares of the Solactive index, 28 have fallen by 20% or more since October 16, the day before legalization. Only four of 62 won.

"The whole industry seems to be evolving together," says Bruce Campbell of British Columbia-based StoneCastle Investment Management Inc., which manages the StoneCastle Cannabis Growth Fund.

For most of 2018, this direction was up. Pot stocks have progressed, particularly since the announcement on August 14 by Constellation Brands Inc. to invest $ 5 billion in Canopy Growth Corp.

On Monday, a dozen pottery titles had almost doubled in value since August 14, with Tilray with a yield of nearly 500%, according to S & P Global Market Intelligence.

Monday's action dulls, but does not erase, these beautiful figures. Despite recent declines, 43 of the 62 values ​​of the Solactive index have risen 20% or more since the grand Constellation-Canopy contract on August 14th.

With records from Brenda Bouw