Marijuana company Canopy Growth (NYSE:CGC) fell 3.6% overnight after completing a 1-for-10 reverse stock split. However, CGC stock has recouped those losses in early trading and is now up about 4%.
Canopy called it a “share consolidation.” Investors who held 100 shares of Canopy a few days ago now own 10 shares.
The newly consolidated CGC stock opened at about $5 per share. It is down 77% so far in 2023.
Drop the Canopy
During the heat of the pot boom in the late 2010s, Canopy was a hot property. Constellation Brands (NYSE:STZ), a liquor company now known for its Modelo beer, bought a big stake in it. Constellation has since come to regret the decision and let options to take majority control expire.
Canopy had sales of just $60 million during its September quarter, losing $228 million or 32 cents per share. Its efforts to diversify into edibles and beverages failed. A company meant to lead that effort, called BioSteel, was recently sold off.
Rival Tilray Brands (NASDAQ:TLRY) has kept itself afloat by becoming a beer company. It bought several regional beer brands and recently obtained eight more from Anheuser-Busch InBev (NYSE:BUD). Tilray is down about 34% this year.
An index following pot stocks is down 14% in 2023. The “winners” have been the largest players. Curaleaf Holdings (OTCMKTS:CURLF) is down just 6% this year. Innovative Industrial (NYSE:IIRL), which focuses on real estate tied to the marijuana industry, is up 2%.
The problem for all pot stocks is that states have moved very slowly toward legalization. Those that did allowed illegal weed to undercut the legal stuff on price. Marijuana has also not proven to be as big a market as advocates once thought. Colorado pot sales have fallen by half from their peak in 2021.
CGC Stock: What Happens Next?
Expect more consolidation and some bankruptcies in 2024. Marijuana is a tougher business than its advocates thought, or its opponents feared.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
