Canadian Licensed Producer Aphria Inc. (TSX:APH) is set to join fellow cannabis companies Canopy Growth Corporation (TSX:WEED) (NYSE:CGC) and Aurora Cannabis (TSX:ACB) (NYSE:ACB) on the New York Stock Exchange after receiving approval to list on Tuesday. The news comes, however, as cannabis stocks continue to fall, plummeting for the seventh straight day following the legalization of marijuana in Canada.
The North American Marijuana Index fell 23.81 points on Tuesday, a loss of 8.77 percent, with the United States Index losing over 12 percent and the Canadian Index dropping nearly 5 percent by the close of trading. Similarly, the benchmark Horizons Marijuana Life Sciences exchange-traded fund (HMMJ) fell 6.09 percent despite early morning gains on Tuesday.
Timing, unfortunately, may be everything for Aphria
Although historically moving to a U.S. exchange has been a boon for Canadian cannabis companies, the present situation with marijuana stocks has yielded a much more glum scenario for Aphria’s counterpart Aurora Cannabis. Shares of Canada’s second-largest Licensed Producer fell over 15 percent before bouncing back towards the close of trading on Tuesday, a grim debut for the cannabis giant.
"Aurora has rapidly developed into a globally mature organization with industry leading and technologically advanced production facilities available to produce at unprecedented scale to meet the growing demand for high-quality cannabis both in Canada and abroad,” said Aurora CEO Terry Booth in a statement seven days ago, just before the market began to tank. “We are also uniquely committed to leveraging our deep knowledge base to further scientific research into medical applications of cannabis, and developing novel, higher-margin product offerings that strongly differentiate Aurora from our competition.”
Aurora fell nearly 6 percent in trading on Wednesday, showing that a move to the U.S. markets is no longer a guaranteed boost to a cannabis company’s bottom line these days. Whether it’s a blip on the radar for Aphria or part of a more significant trend, however, remains to be seen.
What is becoming clear right now is that both companies couldn't have picked a worse time to cross the border.
Marijuana stocks go from green to red
Along with benchmark indicators and other indices, marijuana stocks across the board had a terrible day on Wednesday, beginning with shares of ICC Labs Inc. (TSX-V:ICC) which fell 4.05 percent. The company, which Aurora purchased last month for CAD$290 million makes cannabinoid extracts and also distributes medical cannabis in Colombia.
The list of losers on Wednesday encompassed the industry’s top names, including Canopy Growth Corp. which fell 7.92 percent, Cronos Group Inc. (NASDAQ:CRON), which fell nearly 9 percent, and Hexo Corp. (OTCMKTS:HYYDF) which dropped 5.36 percent.
Still, the drop in marijuana stocks may be part of a larger pattern affecting the markets. On Wednesday the Dow Jones Industrial Average fell over 600 points as a weak housing report, and a tepid tech sector dragged the index down. Suffering from its worst month in years, the Dow erased all of its 2018 gains on Wednesday, closing out the day down 2.4 percent.
And while the current market dip may send some investors into a panic, a few experts do argue that now is the perfect time to buy.
“Over the past few weeks, it seems the overall narrative around equity markets has incrementally turned half-empty, as the combination of Fed hawkishness, trade tensions, midterm anxiety (Dems taking House), tariffs, political troubles, rising interest rates, weakening technicals and excess risk-on have shifted the ‘midpoint’ of consensus to late-cycle/bear market fears,” Fundstrat Global Advisors’ Tom Lee remarked to clients on Wednesday. “It is a long list and enough to turn the ‘wall of worry’ (which markets climb) into a mountain of doubt."
“Yet, curious divergences are developing, which put us in the camp that we will see a reversal of sentiment and a subsequent rally into year-end,” he continued.