The beginning of the year represented a slightly topsy-turvy period for the world of cannabis with a myriad of news hitting the industry in a very short period of time. Because of the new nature of the cannabis market, much of the industry still reacts as though it is in its infant stages. Since the beginning of the year, most of the stocks in the marijuana market have managed to bounce back, including several of the largest indexes in the market.
The U.S. index on cannabis which tracks the top performing cannabis stocks in the market, saw a slight downtrend during the beginning of the year due to news that came out regarding the future of the cannabis industry. After Trump and the Justice Dept. in the U.S. stated they would be revoking the Cole Memorandum, the market responded as such, thus the swift decline early on. Since that time, the market has managed to bounce back quite incredibly.
Companies that want to be listed on this index have to have several factors outlined in their business before they can join the exchange. First, they need to have a market cap of at least $80 million and a minimum daily trading volume of around $2 million. There share price must also be at least $1. Companies that make a revenue of over $5 million per year are exempt from this other trading criteria due to the success of their business. These standards have been made to help ensure that the market will run smoothly, and that these companies are not just shells, and are actually fully functioning businesses.
According to one report “In the month of April, the North American Index gained 3%, led primarily by the huge gains in the U.S. market. The U.S. Marijuana Index gained approximately 19% in April; six companies on the index gained 20% or more and another ten companies gained more than 10%. The average trading volume on the U.S. Index also increased by 77%, compared to the previous month.” This is quite a substantial number given other more traditional markets. These large gains have been the primary reason that so many new individuals are getting into the cannabis space. The gains this past month came from a series of positive news hitting the market throughout the time period. According to the same report “The gains were realized following news that former U.S. Speaker of the House John Boehner had reversed his position on medical cannabis and joined the advisory board of the medical cannabis company Acreage Holdings, which operates in 11 U.S. states, along with former Massachusetts Gov. Bill Weld. In the days the following Boehner and Weld’s announcement, the U.S. Index increased by 25%.”
The issue with the cannabis market is that it is still extremely speculative. This can be a good and a bad thing, but it can often lead to a quite unstable market for the beginning of the time period. The market will undoubtedly begin to stabilize in the near future, which will likely help to continue bringing in new investors into the space. With Canadian sales on the index dependent on whether or not cannabis is legalized this summer, it seems as though North America has a large amount of control on the market. Only time will tell how well the new regulations will begin to affect the market and more specifically, these various indexes that present a new opportunity for investors to get in. The hopes are high that the market can continue to see these large gains in the near future.