The cannabis industry is shifting very quickly. Even though the market was changing prior to the coronavirus, we are now witnessing faster shifts than ever before. In 2019, we saw a lot of the problems of the cannabis market, highlighted by the price action during the year. All things seemed to be looking up heading into 2020, and for some time, they were. But, the pandemic we are all facing right now has made marijuana stocks and the entire stock market, more volatile than ever before.
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Now that we are in the midst of this pandemic, it seems as though we may have a clearer idea of what can change and what we can look forward to as we head into the rest of 2020. Of course, a lot of this is speculation as no one knows where we will be even a month from now. So, take this information with a grain of salt and use your own research to supplement it. Not all of the news heading into the future may be the most positive, but there are definitely some things that are worth looking forward to.
Pot Stocks Use Cost-Cutting Measures
Cost-cutting measures are one of the main factors we have seen cannabis companies use to ensure future growth. Prior to the coronavirus, we saw many of the leading pot stocks begin to implement these measures as a way to show more profits on their balance sheets. Some of the most popular companies in the industry, layoff as many as 500 employees. Layoffs are one of the most prominent tactics to save money that cannabis companies have employed. Canopy Growth (NYSE:CGC) has reported that it has laid off more than 500 employees to help save cash for the future. In addition to layoffs, many cannabis companies have begun to trim production to lower numbers as another method of saving free cash.
But, this seems to be slightly paradoxical as we are seeing a much higher rate of demand in the market. Despite this, many leading cannabis companies have chosen to slow or cut production by solid amounts. The decision to impart these cost cutting measures has not been a slow process, but it has taken hold relatively quickly. With the coronavirus, we have seen the top pot stocks lose billions in market value in only a few weeks. Because of this, many companies are attempting to trim spending to help make it through this rough patch. Whether or not these cost cutting measures will work remains to be seen.
Is Bankruptcy on the Horizon?
With so much lost in market caps, many underground post stocks have turned to bankruptcy as a way to try and keep their businesses afloat. While this may seem like a bad strategy, bankruptcy is quite common in the stock market and something we see as a last ditch effort. In addition to bankruptcy, many leading cannabis stocks have chosen to forgo certain acquisitions to help free up more cash. Acquisitions are a very prominent and albeit costly measure for pot stocks to undertake.
Because of this, sometimes it is better to free up the cash altogether than to acquire more companies. While we may see bankruptcies and less acquisitions come in the future, investors should be more concerned about a pot stocks balance sheet than anything else. With the proper research in mind, finding the right pot stocks can be done in a much easier way.
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