Millennials’ Favorite Stock Market Fad Lost a Staggering $13 Billion in 2019

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  • Marijuana stocks were smoking hot with millennials in 2019.
  • But the industry-wide bear market for cannabis last year harshed the buzz.
  • Here’s how much pot stocks lost, and why the industry is struggling.

In a landmark year for the stock market, four of the five biggest marijuana stocks by market cap woefully underperformed in 2019. That’s bad news for millennials. They apparently went with the “invest in what you know” approach – and got burned.

Investing app Robinhood boasts over 10 million users with an average age of 32. So you could say it’s popular with millennials. When Robinhood published its Top 100 most held stocks last year, Aurora Cannabis topped the list (and it still does today).

Pot stock Aurora Cannabis tops the list of Robinhood users’ favorite investments. | Source: Robinhood

In one week in February last year, three of the four most added stocks on the app were for marijuana companies.

As of June 2019, four of the top 20 most-held Robinhood stocks were marijuana stocks. Investors who held these stocks lost a lot of money.

Marijuana Did Not Get High in Last Year’s Stock Market

The top five marijuana stocks by market capitalization at the beginning of last year missed out on 2019’s stock market bull run. Four of the five spent all year tumbling downward.

Just one, GW Pharmaceuticals made it to New Year’s Day with 8.7% gains.

Here are their opening and closing stock prices for the last year in descending order by market cap today. All figures are from NASDAQ real-time price data via Yahoo Finance.

Canopy Growth (NYSE: CGC)

  • Market Cap today: $6.9 billion
  • Share price on Jan 2, 2019: $26.52
  • Share price on Dec 31, 2019: $21.09
  • Net change in valuation: $1.77 billion lost

GW Pharmaceuticals (NASDAQ: GWPH)

  • Market Cap today: $3.2 billion
  • Share price on Jan 2, 2019: $96.17
  • Share price on Dec 31, 2019: $104.56
  • Net change in valuation: $256 million gained

Cronos Group (NASDAQ: CRON)

  • Market Cap today: $2.5 billion
  • Share price on Jan 2, 2019: $10.25
  • Share price on Dec 31, 2019: $7.67
  • Net change in valuation: $3.34 billion lost

Aurora Cannabis (NYSE: ACB)

  • Market Cap today: $2.3 billion
  • Share price on Jan 2, 2019: $4.89
  • Share price on Dec 31, 2019: $2.16
  • Net change in valuation: $2.90 billion lost

Tilray Inc (NASDAQ: TLRY)

  • Market Cap today: $1.6 billion
  • Share price on Jan 2, 2019: $70.00
  • Share price on Dec 31, 2019: $17.13
  • Net change in valuation: $4.94 billion lost

Legal Cannabis Industry Struggles to Grow

The stock market hasn’t been kind to the legal cannabis industry’s regulatory hurdles, supply shortages, and financial missteps. | Source: Idea Trader/Shutterstock.com

Of the five cannabis companies above, all but GW Pharmaceuticals are based in Canada. Although marijuana is legal nationwide in Canada, regulatory compliance is slowing the nascent marijuana industry’s growth. That’s a major factor in the industry’s stock market losses.

As the Motley Fool reported in October:

Health Canada has been overwhelmed by cultivation, processing, and sales license application backlogs, leaving many growers to wait months, or perhaps even longer than a year, to get the go-ahead to plant, process, or sell marijuana.

Canadian provinces have also been slow to approve applications for brick and mortar dispensaries. The burdens of regulatory compliance have created a classic monopolistic market in which prices are inflated and supply is restricted. The Canadian black market for marijuana is thriving – as classical economists would predict.

These macro headwinds may be the least of investors’ problems with the biggest marijuana stocks. Analysts warn to avoid Canopy Growth and Aurora Cannabis like the plague in 2020. Their financials are a disaster.

Aurora may have overpaid by $3.17 billion for its acquisitions during the company’s recent aggressive expansion. Canopy Growth’s costs are losing the company more money from operations than any cannabis company out there.

These companies may specialize in growing weed, but it seems they’re learning through costly trial and error how to grow a business.

This article was edited by Josiah Wilmoth.

Last modified: January 4, 2020 3:47 PM UTC