April Showers, May Flowers?

Let’s hope so. After a big rally in January and February, the overall cannabis market began to slide in March. And for many investors and traders, April was the first down month of the year. That includes me, down 2.7 — after up 11% in March. And still ahead of the game for the year.

Cannabis Stocks May 2019

I’ve seen theories that recent cash raises by many companies, even the best performing ones, are the culprit. What happens is that the company issues stock to brokerage houses and other outfits that sell stock at a lower price than the current price, which immediately knocks down the price. Owners of stock in other companies fear that could happen to them, so everyone sells.

A series of “earnings” reports, even from the best performing companies, have led to sell offs. (Certainly a few stocks did great in April, but they were the exception.) Capital raises have already doubled for the same period in 2018, according to this Marijuana Business Daily.

Most of my recent new “under the radar” stocks, which are not raising cash, have fared well, while the well known stocks that I’ve had for months and began raising cash have either fallen or slowed down.  (Two in particular, Trulieve and Charlotte’s Web, have done base shelf filings with SEC, giving them the ability to issue up to 500,000 shares of stock in the next two years or so, though neither has done so yet.)

Another Bad Day at Black Rock for Cannabis Stocks across the Board

Today is a bloodbath, so the only flowers we’ll see will be like those in the Rolling Stones song. Today’s rout appears to have been spurred by Canntrust’s capital raise announcement this morning.

Cannabis Stocks in May 2019

Several major Canadian operators will report earnings this month Cronos on the 9th, Village Farms on the 10th, and Tilray on the 14th. (Today these stocks are dragging the overall market down, on no news except recent capital raises, such as Canntrust.)
(Remember what kicked off last month’s Bad Day at Black Rock, Aphria’s horrendous report.) Then we head into summer, which has traditionally been slow. That might happen again, though the amazing number of new stocks to bet on, and the way the entire industry keeps changing every month or two, could keep people in the game.

The SAFE Act will go to a vote before the full House in May or early June, before Congress recesses in July. It is likely to pass, which should lift all boats. That’s potentially a good reason to stay invested at least until then.  But it has not yet been scheduled for the Senate committee, so the suspense will continue through September.

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