Cannabis Stocks and Cryptocurrency: Are Marijuana Companies the New Bitcoin?
Marijuana stocks have been in the news lately. The U.S. company Tilray has registered important gains during the past week, similar to what virtual currencies lived back in 2017. The shares of Canada’s pot producers skyrocketed by Wednesday. Moreover, Tilray opened the week below ·220 dollars and crossed $300 on Wednesday. By Friday, the situation was different, since it closed at $123 dollars.
And indeed, there are some experts that believe that there are some similarities between marijuana stocks and Bitcoin or other virtual currencies.
Marijuana producers from Canada started their recreational sales on October 17. However, their stocks were linked to business fundamental for months. However, things changed in the last weeks when trading became irrational. On Wednesday, Tilray was valued at $30 billion dollars,more than Twitter, CBS and American Airlines.
Something similar happened with Bitcoin, when it reached almost $20,000 dollars and then it went down to $6,700 dollars. The same happened with Tilray during the last week.
Indeed, the company surpassed all the predictions about its sales estimates for 2020 an and for the current year. Indeed, the cash flows for this year increased 340-times, while for 2020, the bullish estimates were exceeded 85 times.
According to Barron’s, Canadian weed stocks were totally overvalued already in March. However, the bull market started in August when the company Constellation Brands decided to invest $4 billion dollars in Canopy Growth.
Another rumour circulated regarding Coca-Cola and a possibility to start using cannabidiol for sports drinks. However, Aurora informed that it did not find an agreement on the matter.
In Tuesday, CNBC’s Jim Cramer hosted Tilray chief executive Brendan Kennedy talking about the industry. After it, on Wednesday, the stock doubled from the previous day. However, this did not last long, and the next day, the stocks plummeted.
One of the things that made Tilray share grow exponentially in the last days has been their scarcity. Only 10% of Tilray share were free-trading in July’s IPO. That’s why Tilray stock was hard to buy.
Other companies that are listed in both Canada and the U.S. have seen their trading volume move to the United States in the last months. However, there are some companies such as AUrora and Aphria that ditched their U.S. subsidiaries this year since the U.S. considers marijuana illegal under federal law.
Nonetheless, Tilray did not say if it is planning to do a follow-on offering. At the moment, it is hard to understand why investors would buy Tilray stock at these market levels.