As Canadian medical cannabis shares plunge from their document highs, analysts say the volatility might dampen the temper for mergers and acquisitions and entry to blazing capital markets for some corporations – at the very least till stability units in.
Since peaking in early January, the Canadian Marijuana Index – representing 24 main cannabis shares – has tumbled 35%, wiping out 7 billion Canadian dollars ($5.6 billion) in market cap.
Some of the most important losers since Jan. 9 embrace Canopy Growth (TSE: WEED), down 44%; Aphria (TSE: APH), down 43%; and Cronos Group (TSX: MJN), down 52%.
Khurram Malik – a companion with Jacob Capital Management, a Toronto-based monetary advisory agency – stated this week’s market pullback is “perfectly healthy” provided that the index had risen 380% since Sept. 1.
“Stocks are coming back to Earth after a very unusual spike in December,” he stated. “They had no business being where they were and now they’re coming back to more reasonable levels.”
Chris Damas, editor of the Barrie, Ontario-based BCMI Cannabis Report, stated the current volatility might “take the bloom off the rose” for corporations taking a look at M&As, as a result of elevating capital by potential acquirers has out of the blue turn into problematic.
Damas stated the present meltdown is not any shock, given the current positive aspects. “The technical indicators have been flashing on this,” he stated.
Damas warned retail buyers against “panic selling” and urged them to “reassess your risk profile and be aware that there’s nothing magical about cannabis. Look at bitcoin. Unless you’re a very risk tolerant investor, you might want to rethink your strategy.”
Matt Lamers may be reached at [email protected]
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