2019 was a lousy year for marijuana stock traders. In the first quarter of 2019, pot stocks improved significantly with most pot stocks gaining more than 50%. After that, most cannabis stocks declined, with many shares trading at an all-time low. A year later, Marijuana stocks are still performing poorly. For instance, Cann Trust, a biotechnology company based in Ontario Canada, is in a financial crisis after it stocks declined by 84% over the past weekend. The sudden depreciation of these stocks has left many traders in a tight fix. As of now, many stock traders are still contemplating on whether to buy Cann Stocks or not. Additionally, cheap black-market Marijuana suppliers have flooded the market, making it difficult for this Ontario based company to compete in the Marijuana business effectively. Despite these challenges, should you consider Cann Trust Stocks in 2020?
1. Supply Problems Facing Canada
The Canadian marijuana industry is currently facing a considerable supply crisis for marijuana. According to Ontario has only twenty-four marijuana dispensaries that are now open. This fact is quite surprising considering that Ontario is home to almost 38% of Canada’s population. Also, Ontario is the largest Marijuana market in Canada. The supply crisis has created an opportunity for black market Marijuana suppliers. These suppliers sell marijuana at meager prices compared to the legal cannabis-producing companies. Low prices, in turn, has led many consumers to buy pot from black market dealers. Therefore, once the suspension is lifted, you can expect Cann Trust to fill in the massive gap in the supply of marijuana. Selling cannabis will eventually have a positive impact on Cann Trust’s stocks.
2. Cann Trust Has an Enormous Production Potential
If Health Canada reinstates the sales license for this company, Cann Trust will be a low-cost marijuana grower. With this production capacity, this company will be the go-to supplier of marijuana. The reason for this is because this firm has the potential to grow up to 100,000 kilos of pot by using hydroponics. Additionally, the company also has the possibility of producing up to 200,000 kilos of marijuana in its outdoor farms. With this in mind, Cann Trust may be one of the largest suppliers of marijuana in years to come.
3. Cann’s wholesale supply deals
Cann Trust is one of four companies that is allowed by the government to sell marijuana at wholesale prices in each of the provinces. Currently, there is a supply problem of cannabis in these provinces. This supply gap has been filled with black market marijuana suppliers. Therefore, you can expect Cann Trust to fully take advantage of this gap once the company has resolved its problems. Moreover, Cann’s production potential may be the only solution to Canada’s marijuana supply crisis.
4. Cann’s Capital Reserve
Cann Trust has not conducted any business since Health Canada enacted license bans. This means that the company’s balance sheet is quite decent compared to other companies in the marijuana business, who have faced a significant decline in their marijuana stocks. Also, some of these companies have conducted massive takeovers that have negatively impacted their books. Therefore, investors might opt for Cann Trust as a company with potential.
1. Suspended Cultivation and Sales Licenses
According to Market Watch, Health Canada suspended the sales and cultivation licenses of this company. This suspension was enacted after Cann Trust was found to have illegally grown marijuana worth $58 million at it’s in-door farms in Niagara. Additionally, this regulatory agency instructed Cann Trust to destroy all the Marijuana plants that were in their Niagara property. This, therefore, means that this company can’t plant any new crops or sell marijuana.
2. Financial Uncertainty
After losing sales and cultivation licenses, Cann Trust announced a massive job cut. More than 140 employees lost their jobs. Even though the lay-offs are temporary, the financial implication of this situation is quite costly, especially in Wall Street.
3. Loss of Trust by Investors and Consumers
After the scandal, Cann’s trust went forth to fire its CEO, Peter Aceto, after the company found out that he was aware of the company growing pot illegally. Despite this move, the company had already lost most of its investors who could not see a lucrative future for this company. Additionally, losing the licenses meant that the company could not provide marijuana to its consumers. Therefore, Cann Trust might just have lot most, if not all all of its clients.
4. Delisting by The New York Stock Exchange
According to Business Insider, the New York Stock Exchange gave a final warning to Cann Trust Company. This company was to be delisted by the New York Stock Exchange for failing to comply with standard rules of the NYSE. First of all, Cann Trust had failed to file its financial statements to NYSE. The company was given a final ultimatum of filing their financial statements by March 2020 or face the consequence of being delisted by the NYSE. Secondly, Cann’s Trust per share trading prices had fallen below the required share price rule. For this sake, the company was given six months to regain compliance with NYSE standard rule. If this firm fails to comply with the standard rules and, therefore, is delisted, it will be significant damage to investor confidence in the company.
Health Canada is yet to state when it will reinstate Cann Trust sales and cultivation licenses. Therefore, the company may not conduct business in the coming month. Additionally, the company has failed to comply with the standard rules of NYSE. Currently, the company is yet to file its financial statements as required by the NYSE. Therefore, the company might be delisted, considering their share prices are not improving. Despite all these challenges, Canada is still facing a vast Marijuana supply crisis. On the other hand, Cann Trust has a production potential that could quickly solve this crisis. Therefore, if you are willing to wait it out until this Cann Trust eventually improves its stock prices, it might just be the right time to invest in this risky stock.