Pot companies are making big changes to survive harsh economic times

Published Aug 11, 2020 09:00 a.m. ET
iStock / JJ Gouin

The honeymoon is over, and marijuana stocks have had a rough year, as 2019 has hit some company’s way below the belt. Some significant changes in the surviving cannabis companies have been noticed.

While some cannabis companies are closing shop, others are laying off employees during these economic times, and some are flourishing. Some have even ventured into acquiring other cannabis companies. Changes are in the air, and significant alterations can be expected to be implemented when the recession finally ends. The National Bureau of Economic Research believes that the United States officially entered into a recession in February.

Looking forward

A multistate operator in Florida suggests that after the recession, we will be seeing perhaps five to seven well-capitalized cannabis players still on the green field. Erich Mauff co-founder of Jushi Holdings, a multistate operation in Florida, believes that there will be a fair amount of blood on the streets when we emerge on the other side.

Fair advice

Some of the steps required to adjust to the significant changes that cannabis companies will be facing in these detrimentally economical downward times may include:

  • Look at what your best options will be for raising capital. Smaller cannabis companies are still in the early growing stages, and as such, raising cash may prove difficult. Keeping costs down is going to be imperative moving forward.

  • Determining where to cut costs could involve significant layoffs. Aurora Cannabis delivered the cutting of over 500 jobs. Canopy Growth followed suit and let go of 500 workers as well. This move for both companies was before the COVID intrusion and may have indicated that this action was only the first round of job cuts. The economic future appears shaky for some cannabis companies and marijuana stocks. Looking forward, it will be paramount that stay self-sufficient and keep costs down, as this will be more critical now than ever before.

  • Figuring out ways to keep operating costs in check will help to decrease the number of bankruptcies that the cannabis industry is facing. Looking ahead, the one option that these flailing companies need to succeed is the means of conserving cash and ways to slash costs.

Final impressions

Perhaps the safest route for marijuana stock investors is to hold off and not purchase any in this economically fragile time. It’s best to wait for the dust to settle from the upheaval we have been delivered and the current COVID-19 pandemic. Doing nothing in the buying of marijuana stocks may be the best move to take right now. Sadly, the year head looks hectic and perhaps unsteady for marijuana stock investors.

Looking forward, one could expect some marijuana stocks to surge and weather the storm that has presented itself. However, there will be other companies whose economic times are not looking green. As the year continues, we will see the play out of separating the pretenders in the marijuana space from those companies that can stand steady while surviving what some call one of the worst economic times in history.

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