2019 has been an extremely disappointing year for investors in cannabis stocks, with the overall market, as measured by the New Cannabis Ventures Global Cannabis Stock Index down 20% after a 55% decline in 2018. The market, which has declined over 71% since early 2018, has moved to three-year lows:
The current environment is challenging, as funding has dried up, a situation I discussed a month ago. Many companies won’t make it or will have to raise capital on extremely unfavorable terms that will substantially dilute shareholders, as they aren’t adequately capitalized. Investors are quickly figuring this out, and the broad selling has certainly hurt the companies with high cash-burns and weak balance sheets the most.
With that said, the aggressive selling over the past seven months has impacted companies that appear to be adequately capitalized as well. The cannabis industry has attracted many growth investors over the past few years, but the steep decline across the board has left some companies that I think should appeal to value investors.
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