Weed stock Tilray (TLRY) has been sending investors on a ride.
Shares of Tilray fell 19.1% to $99.50 per share at market close Monday, marking the British Columbia-based medical marijuana company’s third day of declines. Some other members of the cannabis industry also saw their shares fall Monday, with shares of New Age Beverage (NBEV) down 35.6% and shares of Cronos Group (CRON) lower by 5.2%.
Shares of Tilray have been cut by more than two thirds since hitting a high of $300 per share last Wednesday afternoon. Tilray opened with shares higher by 50.7% on Sept. 19 after the company’s CEO, Brendan Kennedy, told CNBC’s Jim Cramer that investment in cannabis companies “is a global opportunity.” Earlier last Tuesday, Tilray gained approval from the U.S. Drug Enforcement Administration to import medical cannabis into the U.S. for testing purposes.
‘Is it a bubble? Absolutely’
Shares of Tilray continued to climb last Wednesday as traders scrambled to get in fast. The stock then began to collapse after shares were halted for trade five times within an hour. It finished Wednesday’s session up 38% at $214.06 per share — after seeing intraday gains of more than 90%.
Tilray’s intraday volatility last Wednesday produced some winners as well as some losers. Prominent investor Whitney Tilson predicted that individual investors would be hit the hardest amid the collapse in Tilray’s stock price.
“I’ve been short selling for 20 years … and I’ve seen this story so many times before,” Tilson said on Yahoo Finance’s Final Round. “It created good opportunities to make money on the short side. But it makes me sort of feel bad because I know who’s going to get incinerated here, and it’s the retail investors.”
Cramer echoed warnings for individual investors in response to Wednesday’s hectic day of trading.
“This whole group has gotten too hot – no argument here,” Cramer said on Thursday. “Is it a bubble? Absolutely.”
‘Cannabis stocks today feel like Bitcoin and Ethereum did in December’
While Tilray has pulled focus as the most valuable pot company, shares of marijuana industry peers Aurora Cannabis (ACBFF), Canopy Growth Corporation (CGC), and New Age Beverage have been similarly volatile.
The recent cannabis boom has prompted comparisons to the dot-com bubble of the late 1990s and ballooning prices of cryptocurrencies last year.
“The prices of the cannabis stocks today feel like Bitcoin and Ethereum did in December of last year,” said former hedge fund manager and emergent cryptocurrencies authority Mike Novogratz in an interview Thursday at Yahoo Finance’s All Markets Summit. “So if I was long on them I’d sell them. And if you’re a speculator, I’d short them.”
Even with the past week’s volatility, Tilray is still up about 485% from its July initial public offering price of $17 per share and boasts a market cap of more than $9 billion. Kennedy asserted Tuesday on CNBC that medical marijuana could be around a $100 billion industry globally.
In the video above, Yahoo Finance Editor-in-Chief Andy Serwer notes that, “The problem is there are fundamentals, but they don’t begin to justify the valuations. And you [say] that’s because the potential is unlimited. Like, you can take a little sip in the state of Colorado. But soon, all 50 states, you’ll be guzzling gallons, right? So that’s sort of how it’s supposed to play out. But to get from here to there is a huge stretch.”
Milestones that ‘attract pharmaceutical companies to the space’
Regulatory changes and new deals have helped propel the industry forward.
Aurora Cannabis saw a spike in share prices after Bloomberg reported that the company was in talks with Coca-Cola to produce beverages infused with cannabidiol earlier this week. The Canadian company, which currently trades on the Toronto Stock Exchange, plans to establish a U.S. listing next month.
Bruce Linton, chief executive officer of Canadian company Canopy Growth, sees the cannabis industry growing as the legalization of medical marijuana use expands to other countries and becomes more entwined with the pharmaceutical industry.
“You’re going to see, over the next year or two, a great number of milestones met which are going to attract pharmaceutical companies to the space,” Linton said in an interview on CNBC’s Squawk Box. “If you can reduce anxiety in a medical world, you can see where they start to crisscross and become part of the recreational world.”
The business activities of cannabis companies will help to “boost and develop” a variety of other industries, Marijuana Business Daily CEO Cassandra Farrington said on Yahoo Finance’s Midday Movers Friday. She cited construction – which would get a boost on demand for new facilities to grow the crops – and the beverage industry as two such examples.
“Whatever you’re interested in, whatever you are following in the marketplace, there is an aspect of cannabis that you should be paying attention to,” Farrington said.
An earlier version of this story was published on Saturday, Sept. 22.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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