Most cannabis companies reported higher-than-expected operating expenses. The increase in operating expenses drove down cannabis companies’ stock prices. A growing number of regulatory scandals also made stock prices shrink. So, investors are hoping the second phase of legal cannabis will boost the sector. This is expected to happen later this month.
Currently, Canada allows the sale of cannabis only in the form of dried leaves, oil, and gel. The second stage to legal weed, called Cannabis 2.0, would allow the sale of cannabis-based products, such as edibles, vapes, and infused-beverages. Most of the companies are focused on edibles and vapes, in particular. Aphria (APHA) estimates that the sales of vapes and concentrates could create 30% of the Canadian recreational market by 2021.
Vaping-related deaths dampen hopes
On October 8, The New York Times reported the death of a teenager in New York. This raises the total number of vaping-related deaths to 23. This is according to the CDC (Centers for Disease Control and Prevention). Also, the article said that there were reports of about 1,100 vaping-related disease cases across the US.
Although the exact cause of the illness is still unknown, the CDC asked people to stop using e-cigarettes, which contain THC. Further, the federal health agency asked people to not buy unauthorized products. Also, they shouldn’t alter the substances in the e-cigarettes.
Following the outbreak of vaping-related illness, New York and Massachusetts temporarily banned the sale of e-cigarettes. California Governor Gavin Newsom ordered the CDPH (California Department of Public Health) to recommend that young people avoid using vapes.
Vaping pen bans hit market share
At the federal level, the Trump administration could ban flavored e-cigarettes. For more on that, read, “Cannabis Industry Heats Up, Trump Might Ban Vaping.” Also, large retailers like Walgreens Boots Alliance (WBA), The Kroger Company (KR), and Walmart (WMT), announced they will end e-cigarette sales.
Concerns over vaping-related illnesses have led to a fall in the market share of vaping pens. A New York Post article published on September 22 reported that the market share of vaping pens has fallen by 4.2% in California. This happened in six weeks, which ended on September 9. Also, the article reported a fall of 4.6% in Nevada. Vape pen sales also shrunk by 3.2% in Washington state during the same period.
Weakness in the marijuana sector
Vaping-related deaths and regulatory measures have taken a toll on the cannabis sector. The cannabis sector ETFs are the ETFMG Alternative Harvest ETF (MJ) and the Horizons Marijuana Life Sciences Index ETF (HMMJ). These ETFs shrunk by 16.5% and 18.7%, respectively, from August 30 to October 8. In comparison, the S&P 500 Index fell by only 1.1% during the same period.
Aurora Cannabis (ACB) and Canopy Growth (WEED) (CGC) lost 24.8% and 3.8% of their stock value, respectively. Also, Aphria (APHA) lost 16.2% of its stock value. All three companies are getting ready for Cannabis 2.0. On September 23, Canopy Growth’s CEO told CNBC that the company will launch its vaping products in the Canadian market in December. You can read more on Canopy’s initiatives at “Canopy Growth: Getting Ready for Cannabis 2.0.”
Aurora joined with PAX Labs to introduce a portfolio of vape products. For more on Aurora’s growth initiatives, read, “Aurora’s Growth Initiative Update Drives Its Stock.” In June 2019, Aphria joined with PAX Labs to put cannabis extracts in its PAX’s innovative Era device.