The Collapse of Pot Stocks: Refreshingly, Not COVID-19’s Fault

March 10, 2020

Hard to feel sorry for victims of these hilariously obvious pump-and-dump schemes, but they sure got their pockets cleaned out.

There are plenty of questions surrounding cannabis – including whether or not it should be legal, and how it should be regulated and taxed. But there is no question surrounding “cannabis stocks”: They’re phenomenal pump-and-dump operations. And now is the dump-phase.

These are companies with barely any sales, generating huge losses. They were hyped endlessly by vocal promoters and by Wall Street which got rich off the IPO fees. The media oohed and aahed over the meteoric rise of their stocks and their market capitalization which skyrocketed into the many billions of dollars.

For example, Tilray [TLRY], which went public in July 2018, at $17 a share, skyrocketed to $300 a share, and its market cap hit $29 billion, by September 2018. That was the “pump” part of the pump-and-dump. Then the “dump” part commenced. Now the shares have collapsed by 97% to $7.84 and its market cap is down to $815 million.

Tilray has lost money every year of its existence, including $321 million in 2019, on $167 million in revenues. Yeah, these companies are trying to sell an agricultural product, and their net losses are double of what their revenues are. This takes some doing, folks.

Company after company did the same thing: Pump and dump to the max. And they did this in an environment where the products are still not legal in their largest market under US federal law, and where the long established and well-functioning black market is competing ferociously because it doesn’t have to follow rules and pay taxes, and where there are no barriers to entry, and where a surge of farming of cannabis created rampant supply that then caused prices to collapse.

To illustrate the overwhelming beauty of these pump-and-dump stocks on the dump-side of the deal, I have taken the 10 biggest pot stocks and divided them into two charts, with five stocks each, so that the colorful spaghetti doesn’t get too dense. These charts show the collapse in percentage terms from about a year ago. Note that a 100% collapse would mean the shares are worth zero. And that moment is coming up.

Here is the first group of five. The illustrious performance of this group of stocks ranges from -69% to -94% over the past 12 months (percent change data via YCHARTS):

https://wolfstreet.com/2020/03/10/the-collapse-of-the-pot-stocks-refreshingly-its-not-covid-19s-fault/