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Why cannabis stocks have come down from the high

After enjoying some highs due to legalization optimism and the meme-stock craze, cannabis stocks have dropped by about 50%, reports Bloomberg. 

Legalization limbo

Although there have been promising signs that federal legalization could be on the horizon, the uncertainty and seeming lack of interest and time by the Biden administration and Congress has scared retail investors off.

“Retail investors became impatient with the lack of clarity and slow changes that are taking place in Washington,” Charles Taerk, Chief Executive Officer of Faircourt Asset Management, told Bloomberg.

By the numbers

ETFMG Alternative Harvest ETF is down by 50 per cent since February 10 — its highest point in the last two years. Between July 5 and August 27, it slid 18% with investors withdrawing $48.2 million. Another fund, the AdvisorShares Pure US Cannabis ETF, fell by 41 per cent since February 10.

Stateside success

There’s still hope that gradual state legalization will help, with steady revenue growth reported at several MSOs this past quarter.

“Most of the U.S. MSOs delivered low-to-mid-teens sequential revenue growth, which is very healthy, and most of them posted accelerating revenue growth in the second quarter,” Vivien Azer, cannabis analyst at Cowen & Co. “At a minimum, it makes the valuations that much more interesting, that the companies continue to grow their revenues and profits regardless of what happens on Capitol Hill.”

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