Cannabis companies, including Canopy Growth, caused a disastrous financial tragedy in recent months.
When cannabis legalization promised a bright and lucrative future, dozens of companies emerged in the US. However, these stocks, wrapped in a lot of hype and unbridled enthusiasm, proved to be yet another scam aimed at retail investors.
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Let’s start by looking at Canopy Growth Corp, a Canadian company that has been the world’s top performer. Its results are truly astonishing
In the last quarter, which ended on March 31st, Canopy Growth lost a staggering $648 million, with net sales of just $87 million. If we go back a year, in the same quarter, losses reached $394 million, with sales of $102M. But what is really impressive is the accumulated for the last fiscal year: a loss of $3,310M, with net sales of only $402 million.
The company is now in a phase of shedding operations and drastic cutbacks, desperately struggling to stay afloat. In the last six years, since 2017, Canopy Growth has accumulated losses totaling a staggering $7.5 billion.
At the peak of euphoria, Canopy Growth had a market capitalization of nearly $20 billion on February 10th, 2021. That day the debacle began:
On Friday, June 30th, Canopy Growth (CGC) shares closed at $0.43, representing a drop of approximately 99.5% from the peak of the speculative fever, when they reached a value of more than $50 per share.
Taking into account the market capitalization, there was a $20 billion loss. Where did that money go? Nowhere, it vanished. There was capital destruction.
If one takes a look at what happened to THCX, an ETF that includes the major companies in the industry, one can see that the ETF fell 94% from the February 2021 peak. No cannabis company has suffered a different fate.
Another incredible case is Bright Green because it shows how short memory lasts in the market
This company went public on the Nasdaq on May 17th, 2022, after the rest of the cannabis stocks collapsed.
Bright Green was a cannabis grower, which at the time had no revenue. Its stock went public at $15.99 per share, then hit $58 the next day, and eventually got destroyed. A month later, they were worth just $2.59. At the moment, its shares are trading at $1.01. It’s simply delusional.
The cannabis industry had a lot of oversupplies, and regulatory conflicts and lived through a time of stratospheric valuations.
In investments, stories tend to repeat themselves. They tend to go from unsubstantiated euphoria to the fiercest bloodletting, without warning.
DISCLAIMER: This article was written by a third-party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.
This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.
First published in ambito, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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