Weed stocks are tumbling as Canada becomes the 2nd country to legalize marijuana

pulse

October 17, 2018 12:56 PM

Canada on Wednesday became the second country to officially legalize marijuana. Marijuana stocks were trading down by 2% to 7% ahead of the opening bell.

Canopy Growth
Tilray
Cronos

Weed stocks were under pressure early Wednesday after Canada become the second country to officially legalize marijuana. The largest marijuana producers by market cap — Canopy Growth, Tilray, Cronos, and Aurora Cannabis — were trading down by 4% to 9%.

Here's the scoreboard:

On Wednesday, Canada became the first G7 country — and second country in the world after Uruguay — to legalize marijuana for all adults. Each Canadian province has set its own age limit and rules on how to sell the drug — with some opting for storefronts and others pushing business online.

And while many Canadians may be celebrating their ability to freely use the drug, the coming legalization had been a boon for producers operating in the country as their market values exploded amid increasing interest from investors.

Canopy Growth, for example, has seen its market capitalization grow 128% to $12.2 billion after Constellation Brands — the beverage giant behind Corona beer and Svedka vodka — announced a $4 billion investment. Its rival Tilray has seen its market value explode by 555% over that time after making various supply deals.

On Tuesday, analysts at Benchmark said Canada's recreational cannabis market could reach 10.5 billion Canadian dollars by 2023 and suggested that Tilray would continue to lead the pack.

"We expect Tilray to acquire a meaningful share of the Canadian cannabis market based on initial supply agreements and through its first mover advantage in building production scale and strengthening national brands and products across a broad and expanding category," the analyst Mike Hickey said. He has a $200 price target for the stock — 26% above where shares settled Tuesday.

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