Legalization of Cannabis in Canada was eagerly waited for. Since 2016, there was so much expectation on massive sales of cannabis after legalization. However, failure of cannabis stocks in Canada after legalization is evident.
Let’s see exactly what contributed to the failure of stocks in Canada after legalization.
Black Market Existence
though the government is willing to set low tax on cannabis, the black market gets away with this taxation and even income tax. The black market evades license fees and cultivation fees. Low prices of marijuana in the black market largely influence the sales of marijuana in the legal market.
Massive Supply of Cannabis
supply of cannabis has mostly influenced the prices of the commodity. With growers producing too much of the product, the prices have intensively declined to make the stocks valueless in the market.
What might be pushing the producers to oversupply?
Unpredictable demand. Producers are not sure how big the market might grow after legalization, and hence they don’t want to take any chances.
The producers are adamant about pushing the prices down to get rid of the small players in the market.
Large production in any sector economically favors any industry as it lowers production costs.
Producers might also be after making massive sales while the prices are still high to generate high profits.
Hope for real results
the investors wait to see evident results in cannabis stocks, and the stocks value have declined intensively. This has been pushed by an unexpected low demand for the shares by the investors. Even though Canada legalized recreational cannabis, investors are still scared to venture into the sector as they are waiting for hard evidence on the success of the pots.
Delayed High Margin products
that are expected to add value to cannabis such as infused beverages and edibles are yet to be legalized. This has forced the producers to stick to dried flowers that have a shallow margin. Legalization of the high margin products will see the industry grow and attract more investors into the sector.
Predictable Historical Low Pot Stocks
to history, pots stocks are likely to head lower. Investors are not willing to ignore this fact as has been experienced in the last two decades. It takes time for any business to succeed and put the small players aside.
Fear of U.S Failing to Legalize Cannabis
The U.S seen as the largest cannabis market worldwide, investors are hell bent on waiting until the U.S can legalize cannabis for recreational use before they can venture into the market. Fail of recreational legalization of marijuana in U.S might be a possible reason for the further failure of cannabis stocks in Canada.
traders and short term investors ventured into the sector with too much expectation that legalization of cannabis will make the market favorable. Once the real results occurred, the small traders were very fast on exiting the market, and hence they contributed to the failure of cannabis stocks in Canada.
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