Marijuana is Becoming a Billion-Dollar Business in Canada. Now all it Has to do is Become Legal

Article by William Marsden, Washington Post


It’s been a wild ride for Canada’s marijuana companies, whose stocks enjoyed an exhilarating high in recent days before mellowing out.

Last week, marijuana stocks suddenly skyrocketed, leaving market analysts bewildered. The enormous upswing in stock prices was even more amazing given that the government is giving every indication it plans to go slow in its promise to legalize recreational marijuana use — a move that the government estimates would unleash a $5 billion to $7 billion Canadian industry.

Stock in the largest marijuana company, Canopy Growth Corp., leapfrogged last Wednesday to a high of $17.86, from $9.75 Canadian. The increase happened so fast that the Toronto Stock Exchange issued four stop-trading orders during the day after the stock rose more than 10 percent in five minutes. More than 24 million shares traded that day.

The trading drove the company’s market cap to more than $2 billion Canadian even though its most recent quarterly financials showed total revenue of only $8.5 million.

Canada’s other four publicly traded pot stocks also showed large increases, but nothing like front-runner Canopy.

While the increases may have gotten a boost from pot legalization votes in four U.S. states, Neal Gilmer, a marijuana stock analyst for Mackie Research Capital in Toronto, said nothing in the fundamentals accounts for the sudden upswing — which was followed days later by a drop back to more normal levels.

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