The weakness in stock prices after the first quarter can be attributed to many factors including continued disappointment with the legalization implementations in major U.S. and Canadian markets. The legal cannabis market has been on a downward trend. The market capitalization of the 100 largest cannabis stock companies has fallen from around $86 billion to just over $43 billion at present.
The North American legal cannabis industry is in crisis. The total market capitalization of the 100 largest cannabis stock companies has almost halved since spring 2019.
Disappointing sales figures, deaths from the vaporization of THC oils, further scandals and competition from illegal cannabis suppliers have caused prices to plummet.
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The legal cannabis industry is in trouble
The legal cannabis industry in North America is in trouble due to high taxes and high costs involved in complying with government regulations.
Unless regulations are relaxed and taxes lowered, the black market will continue to flourish and legal cannabis producers will lose billions of dollars each year.
For example, the legal cannabis industry in California last year was worth only $3 billion compared to the illegal market which grew to $10 billion.
“Criminals offer cannabis about 50% cheaper than legal suppliers,” said Marc Davis, Canadian financial journalist and cannabis expert.
Cannabis industry becoming real
Georg Wurth, Managing Director of the German Hemp Association, sees the crisis on the legal cannabis industry more calmly.
“The cannabis industry is becoming increasingly real. This displaces the fantasy from the share prices. Without wanting to evaluate individual companies, one thing should be clear: with other countries and U.S. states legalizing and the progressive suppression of the black market, the sector will continue to grow in principle,” he explained.
The cannabis market is on trend
Since the end of April 2019, the legal cannabis market has been on a downward trend. The market capitalization of the 100 largest cannabis stock companies has fallen from around $86 billion to just over $43 billion at present.
This is shown by data from the CannabisMarketCap.io website. The share of the Canadian market leader Canopy Growth, for example, fell in the same period on the New York Stock Exchange (NYSE) from almost $52 to less than $19.
Problems for legal cannabis providers
In the U.S., federal law continues to cause problems for legal cannabis providers. Although numerous U.S. states have legalized cannabis, THC is still an illegal drug according to federal law.
As a result, banks deny cannabis companies the granting of regular loans. Many smaller cannabis companies would have liquidity problems as a result.
The cannabis industry, however, is counting on next year’s U.S. presidential elections. If the Democrats win, the chances of complete legalization of cannabis in the United States are good, insiders hope.
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First published in wallstreet:online, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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