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Cannabis companies may be reporting record sales in some cases, but investors wouldn’t think that based on the stock prices. The fourth quarter was challenging for a number of reasons ranging from a fast expansion of stores in some provinces in Canada, disappointments in legislation for new cannabis states, and overwhelming debt clouding some company outlooks. In addition, there were companies reporting slowing sequential sales and that was enough to cause many investors to throw in the towel. You can read the entire report here. 

The Green Market Report Cannabis Company Index dropped another 29% during the fourth quarter as it seemed once again every company except for two experienced a sharp decline in share valuations. In previous quarters, the cannabis industry seemed to mirror the broader market, but those days are over. The S&P 500 turned in a fourth-quarter performance that rose 10.65% and the Russell 3000 had a return of 9.3%. 

Overall, the Green Market Report Cannabis Company Index fell by 27% in 2021. By comparison, the North American Marijuana Index fell by 25% for 2021. Looking at the full year, the S&P 500 rose 26.89% in 2021 and this was its third straight positive year. The Dow and Nasdaq also joined the party with returns of 18.73% and 21.39% for the year and three years of positive returns. Investors would have been better off avoiding the cannabis stocks for the past year.

Changes To The Index

The Index made the following changes at the end of the fourth quarter. Hexo is being removed from the Index as the company has stated it is having problems meeting its debt obligations. After two quarters in a row of poor performance, it’s time to release this one into the wild. Taking its place is Glass House Brands (OTC: GLASF) with a market cap of $220 million. 

The company recently acquired CBD company Plus Products for a song. The company’s CEO Kyle Kazan has expressed his desire to continue lowering the cost to cultivate cannabis in an increasingly competitive landscape. He recently said, “We have a planned total footprint of 6 million square feet and projected total biomass production of approximately 1.7 million pounds, which we believe would make Glass House Brands the largest and most efficient cannabis supplier in the U.S., by a wide margin. With this significant capacity, we will be extremely well-positioned to supply cannabis consumers across the country once that opportunity arises.” Glass House also completed the acquisition of the approximately 160-acre SoCal Facility with six on-site greenhouses in September 2021. 

The company’s brands include the namesake Glass House Farms, Bella Thorne’s Forbidden Flowers, and Mama Sue CBD tinctures. The company has also created brand partnerships with singer-songwriter Jenny Lewis and Legion of Bloom. In August, Glass House reported cash and cash equivalents of $134.3 million as of June 30, 2021, versus just $4.5 million as of June 30, 2020. During the quarter, Glass House said it eliminated $38.3 million of debt through the completion of a Preferred Stock offering.

In Closing 

The first quarter of 2022 looks like a replay of last year. Cannabis stocks have gotten off to a good start as valuations moved higher. The early earnings releases from Tilray and Organigram brought optimism back to investors. Both companies reported rising revenues and solid balance sheets. In addition to that, California Governor Gavin Newsom said he would start to address the taxation issues for cannabis in his state. In other positive news, Germany’s new leaders have quickly moved to legalize adult-use cannabis in the country which could spark efforts for a legal market in Europe as a whole. All of this is great for the industry and for investors. While the latest COVID variant Omicron has put a damper on the pandemic recovery, there is hope that this variant will be short-lived. The fourth quarter certainly tested investors’ resolve, but it looks as if 2022 may finally pay off for the patient shareholder.

The Green Market Report Cannabis Company Index started 2019 on a high note as the first quarter jumped 40%, but the air came out of the market during the second quarter and the entire group took a tumble. Many of the cannabis stocks slid as much as 20%. This happened despite the number of large deals announced during the quarter that set the stage for massive consolidation.

The Green Market Report Index fell 21% in the second quarter but is still up by 19% for the six months of 2019. To get an idea of how poorly the cannabis stocks performed, the S&P 500 rose by 4.3% in the second quarter. Worries over the trade war with China did dampen the broader market and funds are flowing more into the bond market, but the equities still managed to squeak out a positive performance.

Cannabis companies are vying to be the largest in the industry and the latest round of mergers and acquisitions perfectly illustrate this. While there were numerous positive events that occurred during the quarter, the selloff refused to reverse course no matter what good news came out. The selloff has continued into the third quarter and still hasn’t shown any signs of bottoming out yet.

The selling hasn’t diminished the appetite of investors. Funds like Merida Capital’s $200 million fund continue to get launched and money continues to flow into the sector. Viridian Capital Advisors reported that by the end of June 26 the industry had completed 339 capital raises versus 305 capital raises for 2018.  The total amount raised in 2019 for the first six months was $7.3 billion versus 2018’s $4.5 billion. A handful of names actually managed a solid performance in the second quarter, but it became a contest of who could control the bleeding.

Top Best Performing Stocks – Second Quarter 2019

The Bottom 5 Worst Performing Stocks – Second Quarter 2019

The following changes have been made to the Green Market Report Cannabis Company Index. CannTrust (NYSE: CTST) is being removed as a result of the company’s scandal involving the growing of plants in rooms that were not licensed and Isodiol (OTC: ISOLF) is being removed based on valuation. Two companies have been added to replace the ones removed and they are Valens GroWorks (CSE: VGW) and Green Growth Brands (GGB).

The full report is available in the Report section on the website for $9.99. The GMR Index Review for the First Quarter is now available for free.

The Green Market Report (GMR), the cannabis industry’s most trusted source for credible in-depth financial and economic reporting, today released its 2018 Cannabis Company Index Q4 Summary Report. The report can be downloaded at GreenMarketReport.com/Reports.

The GMR Index follows the trading activity of 30 selected public cannabis companies that denote market dominance. After rising 56% in the third quarter, on a plethora of good news, the Index plunged along with the broader market in general which saw stocks give back most of the year’s gains. The S&P 500 fell 9.2% in December, while the Horizons Marijuana Life Sciences ETF (HMMJ) declined by 39% in the fourth quarter. The GMR Index managed to gain 5.5% for the entire year, while the HMMJ actually dropped 19% for the year.

The fourth quarter got off to a good start as stocks began ticking higher at the beginning of October, but then halfway through the month, the selloff began. While there was a slight recovery at the beginning of November, stocks took another downward turn and never looked back.

History continued to be made in the cannabis industry during the last quarter. On October 17, Canada began the first day for sales of adult use cannabis in Canada – making 1017 the new 420. The mid-term elections in the U.S. were the next big event for the quarter. More states legalized cannabis in this year’s midterm elections in November, with Michigan becoming the latest one to legalize adult-use cannabis. Missouri and Utah both approved medical cannabis. If that wasn’t enough for the industry to cheer about, in December lawmakers in D.C. passed the 2018 Farm Bill, which included an amendment legalizing hemp.

“The fourth quarter of 2018 was very challenging for cannabis industry stocks as share prices plunged as stocks, in general, entered bear market territory. Legalization of hemp in December set the stage for recovery as cannabis stocks have mostly moved higher in the early days of 2019,” stated Debra Borchardt, CEO of Green Market Report.

The best performing stock in the GMR Index was Charlotte’s Web Holdings (CSE: CWEB) which managed to end the quarter neither gaining or losing. Remaining flat was a huge accomplishment.  The company stands to benefit greatly from the legalization of hemp and hemp-derived CBD products.

The Index decided to add Acreage Holdings (CSE: ACRG-U) as that company continues to add to its portfolio and now has a presence in 19 states. iAnthus (CSE: IAN) is acquiring MPX Bioceutical and is also getting added to the Index. While the Index was sad to let MPX go, the substitution is just as stellar.  Cresco Labs (CSE: CL) is added as this multi-state operator focuses on markets with high barriers of entry. Finally, Florida-based Trulieve (CSE: TRUL) was added as the company continues to report increasing revenues and has embarked on an expansion strategy outside of the state.

“Looking ahead to 2019, we expect to see the industry adjust to the legalization of help and what that means for hemp-derived CBD products,” added Borchardt. “We expect the industry will experience more consolidation and even more cannabis companies to become publicly traded stocks.”