Why COVID-19 is destroying pot stocks

Published May 2, 2020 12:00 p.m. ET
iStock / Baris-Ozer

One may wonder if anything could get worse in this COVID-19 nightmare that much of the world is experiencing today. The number of those infected by the virus is rising, and the amount of people dying from the virus is also going up.  At the same time, COVID-19’s impact on some marijuana stocks has been devastating globally. The pot stocks are moving but it's in the opposite direction of what we want.

Many individuals are living with and suffering from the deadly COVID-19 pandemic virus, which has also claimed revenue from some victims in the form of marijuana stocks. COVID-19 spread fear throughout the marijuana stocks space, and as the novel virus spread, so did the downward spiral of pot stocks worth. Major stocks, particularly the pot stocks, are the result of fear.

Why

The disruption that COVID-19 had on the cannabis supply chain showed itself in the marijuana stocks. While non-essential businesses were shut down, the ripple effect presented itself in the lack of needs for the cultivators and pot retailers. Canopy Growth (NYSE: CGC) notified the public that it would be closing its corporate-owned dispensaries. Interestingly Canadian LPs were noticing shutdowns in China before the Canadian experience, and those shutdowns were affecting the supply chain from that country prior to its arrival, as China was the primary source of vape accessories and pens to Canada and America.

The fearful cannabis stock market reacted

  • Canopy Growth, often referred to as one of the biggest marijuana producers in Canada, saw shares drop by over 10%
  • Aurora Cannabis had to witness their stocks moving in a down way direction numbers showing were in the 12% range
  • Village Farms saw the stocks falling by over 11%

No weed here

As we move forward in these tense times, many cannabis users are looking at different means to help alleviate the increased stress. Vape products are one of the things that are used to lessen anxiety. However, vape products are manufactured in China for many of the companies. The fear of COVID-19 is reflected in the workforce in China, which ultimately shows its face in the marijuana-related stocks  as they decline.

Workforce layoff

As the fear from COVID-19 spreads, so does the decline of the cannabis workforce. Organigram Holdings Inc. announced that they would be laying off almost half of the workforce.  The company whose headquarters are located in Moncton, N.B stated that this move is in the best interest of the employees and their families. Organigram pot stocks are battling the virus in the best way they can and deem this method to be beneficial for cannabis investors.

The pot at the end of the rainbow

Cannabis stocks have proven to be intensely reactive to the COVID-19 pandemic virus of 2020. Pot stocks are now more volatile than regular shares. The losses have been substantial in this sector of stocks, but some marijuana stocks are fighting the battle and are winning. Luckily for cannabis investors, the bounce back from COVID-19 effects are proving to be quicker than the expected return to normality for non-cannabis stocks. The fallout from the coronavirus or COVID-19 set the scene for some of the heaviest drops in stock prices in history.

How COVID19 is altering recreational drug demand

Author

Related posts