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Cannabis Stock Report: Marijuana Markets Tumble Despite Record Highs On Wall Street - Is It Time To Panic?

By Brandon A. Dorfman
Jan 12, 2018

Cannabis stocks stumbled for the second day in a row on Thursday, raising concerns of panic in the marijuana markets as investors appeared uneasy despite solid news from around the industry. In a marked turn of events, MJIC’s United States Marijuana Index outperformed its Canadian counterpart on Thursday, posting a slight gain to the latter’s noteworthy decline. It was another record day on Wall Street as the market bounced back from Wednesday’s NAFTA scare, with energy stocks and reliable news from the corporate sector helping the rally. Of note was Walmart’s announcement that the company would institute wage increases and bonuses following the passage of the Trump administration’s tax reform plan.

Hidden in the joyous celebration on Thursday were signs of a weakening economy, however, as Walmart buried the fact that along with their grand gesture they would be cutting thousands of jobs at dozens of Sam’s Clubs across the country. On top of that, first-time jobless claims came in higher than expected this morning, showing that the emperor may not be quite so fully dressed. Still, the Dow Jones Industrial Average, Nasdaq, and the S&P 500 all notched impressive gains to close the day. It was a similar story up north, where Canada’s top stock index rose 38.99 points or .24 percent.

It was perhaps those underlying market signals that had cannabis investors apprehensive again on Thursday, as all significant marijuana indices fell save for MJIC’s United States Marijuana Index, which gained  0.45 points, or 0.45 percent to close the day at 100.18. Even MJIC’s monthly report for December, which showed The North American Marijuana Index climbing 61 percent in December was of little consolation to investors on Thursday, as the Index fell 22.42 points or 6.41 percent.


The Marijuana Index rose 61 percent in december, broken down by country (c) 2017 The Marijuana Index www.MarijuanaIndex.com

Other indices fared about the same, with The Cannabis Stock Index, which is overseen by 420 Investor, taking one of its more significant hits in weeks, falling 9.15 points, or 5.32 percent to close the day at 162.76.  Solactive’s North American Medical Marijuana Index also took a massive blow on Thursday, dropping 144.04 points for a 7.30 percent loss to close the day at 1829.82. It was a rough dose of reality for an index that broke 2000 points recently.


Solactive's Index fell below 200 points Source: Solactive.com

Marijuana’s two most active funds, the Horizon Marijuana Life Sciences Index ETF and  ETFMG’s Alternative Harvest ETF were both knocked off their perch on Thursday as the reality of the day sank in, and investors began to enter into panic mode. The former fell $1.80 per share, a drop of 7.55 percent, closing out the trading day at $22.05 on a trading volume of 3099727. Meanwhile, the latter fund dropped $1.89 per share for a 5.03 percent loss, closing out the day at $35.70 per share.

It is hard to argue against the recent meteoric rise of the marijuana market, primarily as California and soon Canada’s recreational markets infuse the industry (and shareholders) with a healthy injection of cash. However, the fundamentals of the marijuana market are volatile at best right now, with investors slowly working themselves into panic mode at a time when they should be celebrating. Is it all the work of Jefferson Beauregard Sessions or is there another market force undermining the sector at this time? Patience is key.

Meanwhile, Around The Industry...

There are plenty of recommendations on how to get out of trouble cheaply and fast. Most of them come down to this: Deny your responsibility… Receiving support is CanniMed Therapeutics (TSX:CMED), who announced on Thursday that independent proxy voting advisory firm Institutional Shareholder Services Inc. recommended that shareholders vote for the Newstrike Resources Ltd. (TSX-V:HIP) acquisition at the upcoming meeting on January 19. The advisory firm further noted that Aurora Cannabis’ (TSX:ACB) hostile bid would be a “dilutive” one for shareholders. According to a statement, CanniMed quoted the advisory firm as saying that Aurora’s bid would cap at $24, cutting in half CanniMed’s proposed stake in the firm.

The CanniMed-Aurora-Newstrike triangle became a hostile war of words in recent weeks, beginning with Aurora’s purchase of 566,000 shares of CanniMed on the open market. Aurora followed up that move by openly mocking CanniMed’s early-January deal with Newstrike subsidiary Up Cannabis, calling it “bizarre.” CanniMed pushed back, preparing a lengthy document outlining the downsides of a merger with the rival cannabis company for shareholders; a no-holds-barred document that claimed Aurora was more bark than bite.

“[CanniMed Shareholders should] vote FOR the proposed acquisition of Newstrike, which will allow the company to access the recreational cannabis market while also significantly expanding its production capacity and diversifying its geographic footprint,”  Institutional Shareholder Services Inc. write in their assessment of the situation. “The transaction is expected to be accretive on a 2019 estimated EBITDA-per-share basis and may have a positive branding impact.”

WeedMD Hits The ATM

The treatments don't always work. Symptoms never lie… Cashing in is WeedMD Inc. (TSX-V:WMD) who announced on Thursday the closing of a $34.5 million bought deal financing to a group of underwriters lead by Eight Capital. According to a statement, the company sold approximately 16 million shares for a price of $2.15 per unit. WeedMD intends to use the proceeds from the financing for expansion at its Strathroy Greenhouse, as well as for its Aylmer Facility, among other purposes.

WeedMD has been busy over the past few weeks, beginning in mid-December when they announced the signing of a supply agreement with Jarlette Health Services. In an interview with the Business of Cannabis publication during that same month, WeedMD CEO Bruce Dawson-Scully discussed his company’s role in introducing cannabis to senior citizens. According to a statement, Dawson-Scully believes that “the senior demographic is both highly accepting and curious about the benefits of medical cannabis.”

Namaste Finds Nirvana

But it’s more than ten years now and he has yet to make thirty-five dollars a week… Always closing is Namaste Technologies Inc. (CSE:N) who announced on Thursday the signing of a global digital reseller-supply agreement with Phivida Holdings Inc. (CSE:VIDA) (OTCMKTS:PHVAF). According to the terms of the deal, Namaste will now become the preferred retailer for Phividia’s infused functional beverages and clinical health products for the next two years. Hoping to go global, both companies used the agreement to target overseas markets such as Germany and Australia.

“We’re looking forward to entering the beverage space together with Phivida as we believe there is significant demand for these products in our market,” said Namaste CEO Sean Dollinger in a statement. “Many of our successes to this point can be largely attributed to our keen ability in identifying industry leaders and then forming strategic alliances.”

Other News and Notes

I have to tell you about the future… Rooting for the Red Sox is Future Farm Technologies Inc. (CSE:FFT) (FFT.CN) who announced on Thursday the acquisition of a controlling interest in Massachusetts-based Bristol County Wellness Center, Inc. The Wellness Center recently received permission from Attleboro city officials to commence building a dispensary; a 24,700 square foot facility that will also house their grow operation. “This transaction allows us to operate in a state that has approved, but not yet implemented, the recreational use of cannabis, which positions us as one of the first movers in the state,” commented Future Farm CEO William Gildea.

Cash rules everything around me… Banking on banks is Global Payout, Inc. (OTCPINK:GOHE) who announced on Wednesday that its majority-owned subsidiary MoneyTrac Technology, Inc. would proceed with a Token Offering aimed at cannabis businesses shunned by the mainstream banking system. Not unlike other banking solutions and cryptocurrencies, MoneyTrac’s M-Token hopes to offer the cannabis industry a decentralized alternative to cash-only transactions. According to a statement, the company expects to launch the token in the first quarter of 2018.

Quick Bites

All the news that’s fit to print...  Marijuana Company of America (OTC:MCOA) launched hempSMART Pain Cream through their subsidiary hempSMART… ICC Labs Inc. (TSX-V:ICC) completed a “critical objective” recently, the “first outdoor sowing of Cannabis Sativa L. seeds with 430 acres sown"... Medical Marijuana, Inc. (OTC:MJNA) subsidiary Kannaway LLC plans to hold a Roadshow Event in Orange County, CA on Saturday...

Stocks to Watch (And Watch Out For)

Advantis Corporation (OTCPINK:ADVT) announced a major deal with Players Network (OTCQB:PNTV) on Wednesday. The company’s shares fell 3.23 percent on higher than average trading volume on Thursday to close at $0.021 per share.

Cannabis Science, Inc. (OTC:CBIS) put together a new construction management team on Wednesday. Their shares fell 8.42 percent on Thursday on higher than average volume trading to close out the day at $0.10 per share.

Until tomorrow…

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