Friday, October 19, 2018
National News

It's high times for soaring marijuana stocks on Wall Street

NEW YORK (AP) Reefer Madness has gripped Wall Street.

Investors are craving marijuana stocks as Canada prepares to legalize pot next month, leading to giant gains for Canada-based companies listed on U.S. exchanges. Some experts are concerned that the ending will be a buzzkill.

Billions of dollars have poured into the stocks in the last few months, and investors smell green (money, not leaves) in the air as they consider the opportunities these companies might have as the marijuana market in Canada grows, along with the possibility that the U.S. and other countries could follow suit.

The value of one company, British Columbia-based Tilray, has jumped tenfold since its initial public offering just two months ago. The company had $20 million in sales in 2017, but it's now worth considerably more than Macy's or Hasbro. With those huge gains have come extreme swings.

Wednesday was a trip for Tilray stock: after closing at $154 the previous day, it opened at $233 a share, soared to $300, and then plunged to $151 before rallying to close at $214. Trading was halted several times because of that volatility.

For some people on Wall Street, it's bringing back unpleasant memories.

"We just went through this eight months ago with cryptocurrencies," says investor Ken Mahoney, CEO of New York based Mahoney Asset Management. He said the investors buying these stocks at their current prices are already betting on enormous successes, but even if legal marijuana takes off, some of the companies will fail.

It's easy to see why investors are so optimistic. This week, Coca-Cola acknowledged it could one day offer cannabis-infused drinks. That came after reports Coke was in talks with Aurora Cannabis about drinks containing cannabidiol, or CBD, a marijuana component that isn't psychoactive. Aurora stock, which is listed in Canada, surged.

That would be a sort of return to Coca-Cola's roots, as the drink contained some cocaine when it was invented.

In August, Molson Coors said it will team up with Hydropothecary Corp. to sell marijuana-infused drinks, and Canopy Growth announced a $4 billion investment from Constellation Brands, the company that makes Corona beer.

The stocks jumped Tuesday when the Center for Medicinal Cannabis Research at the University of California San Diego said the government will allow it to import capsules containing cannabis compounds from Tilray so the center can study their effectiveness in treating tremors.

"The total global (cannabis) category could reach upwards of $200 billion, as suggested by Constellation Brands," said Stifel analyst Christopher Growe.

Canopy Growth has more than doubled in value this year, and another rival trading in the U.S., Cronos Group has jumped 78 percent. KushCo Holdings has surged 36 percent and GW Pharmaceuticals, which recently received government approval for a cannabis-derived drug used to treat seizures, is up 29 percent.

Growe said the value of the 22 largest marijuana companies trading in Canada has more than doubled since Aug. 15, when the Canopy-Constellation deal was announced.

Recreational marijuana will become legal across Canada on Oct. 17, and consumable forms of the drug will be legal in 2019. Marijuana remains illegal in the U.S. at the federal level, but it's legal for recreational use in nine states and Washington, D.C., and for medical use in 31 states, according to the National Conference of State Legislatures.

Growe noted that governments considering marijuana legalization or similar policies are likely to move very slowly. And Mahoney said if there is a bubble, larger investors will protect themselves and won't overinvest in single companies, but smaller investors who see a chance to get rich quickly could suffer painful losses.

"The small investors always end up with the short end of the stick," he said. "They don't have the insight, they don't have the experience."

An investor who bought Tilray stock Wednesday might have agreed, as the shares fell 18 percent to finish at $176.

Comments

AP Top News at 2:05 a.m. EDT

AP Top News at 2:05 a.m. EDT
Updated: 2 hours ago
Afghan parliamentary polls underway despite threats

Afghan parliamentary polls underway despite threats

Tens of thousands of Afghan forces fan out across the country as voting begins in parliamentary elections following a campaign marred by relentless violence
Updated: 2 hours ago
Kamala Harris: Midterms a fight for 'the best of who we are'

Kamala Harris: Midterms a fight for 'the best of who we are'

Sen. Kamala Harris is urging Democrats in the South's first presidential primary state to see the 2018 midterm elections as a fight for 'the best of who we are.'
Updated: 2 hours ago
Dems struggle with Trump's approach to culture war

Dems struggle with Trump's approach to culture war

Playing Trump's game in culture war proves a losing strategy for Democrats
Updated: 2 hours ago
Attack in Afghanistan is a reminder of formidable task

Attack in Afghanistan is a reminder of formidable task

An attack that the Taliban says targeted the top U.S. commander in Afghanistan is a reminder of the formidable task the Trump administration faces to get America out of its longest war
Updated: 2 hours ago
Trump: Saudi arrests in Khashoggi death 'a good first step'

Trump: Saudi arrests in Khashoggi death 'a good first step'

Trump: Saudi arrests in Khashoggi death 'a good first step'
Updated: 2 hours ago
In full campaign mode, Trump calls Dems 'too extreme'

In full campaign mode, Trump calls Dems 'too extreme'

President Donald Trump told a rally that Democrats are "too extreme and too dangerous" to take control of Congress
Updated: 2 hours ago
Saudis blame 'fistfight' for Jamal Khashoggi's death

Saudis blame 'fistfight' for Jamal Khashoggi's death

Saudi Arabia admits Saudi writer Jamal Khashoggi was killed in the Saudi Consulate in Istanbul in a fistfight, 18 people held as suspects.
Updated: 2 hours ago
Russian woman charged in first 2018 election meddling case

Russian woman charged in first 2018 election meddling case

U.S. charges Russian woman in the first case involving meddling in the 2018 elections.
Updated: 2 hours ago
Trump's campaign mode revives fiery immigration talk

Trump's campaign mode revives fiery immigration talk

Trump is returning to tough immigration rhetoric as he looks to stave off Democratic gains in Congress.
Updated: 3 hours ago