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Pot stocks continued their slide Tuesday, but a midday rebound limited the damage on what was shaping up to be another disastrous day.

The Horizons Marijuana Life Sciences ETF (HMMJ), the largest pot-stock vehicle, closed down just under 2 per cent. In late morning trades, however, it had fallen 10 per cent, a decline posted just twice in the fund’s history – including Monday. Multiple cannabis companies were down 15 per cent or more before lunch.

By the close, however, results were mixed, with Canopy Growth Corp. down 1.4 per cent and Tilray Inc. down 1.5 per cent.

However, Aurora Cannabis Inc., in its first day of trading on the New York Stock Exchange, closed down nearly 12 per cent.

The sector has been tumbling since Wednesday’s legalization of cannabis in Canada, with most cannabis stocks down in three or more of the five trading sessions. Monday was the worst of it, with the 62 companies in the Solactive North American Marijuana Index losing a combined $10 billion, and the HMMJ ETF suffering its worst day since its April 2017 inception.

From the close Tuesday Oct. 16 through Oct. 23, the 62 companies have lost $20 billion in market value, going from a total market capitalization of just under $95 billion to just under $75 billion, according to Standard & Poor’s Global Market Intelligence.

There has been some negative news in the last week. In trying to explain the drop, some have pointed to product shortages as a bearish sign, while others pointed to anti-marijuana comments from Conservative Party leader Andrew Scheer or a report from ratings agency DBRS in which it said it believed some licensed producers will ultimately fail.

Other say legalization day was a simple tipping point in sentiment after a remarkable amount of enthusiasm since Aug. 14, when Constellation Brands Inc. said it would invest $5 billion into Canopy. Many investors saw it as a validation of the sector and prompted them to try pick the next beneficiary of beverage-industry largesse.

“This looks to be a bit of a rebound after the selling in the space,” says Elliot Johnson, chief investment officer of Evolve Funds and the portfolio manager for Evolve Marijuana ETF (SEED). “But you can’t read too much into an afternoon of price stability.”

Evolve’s actively-managed fund garnered attention for lightening its positions in some of the major names in the space and moving toward both smaller-cap players and other companies with just ancillary involvement in the industry, such as e-commerce provider Shopify Inc. and retailer Loblaw Cos. Inc., whose Shoppers Drug Mart plans cannabis sales.

Of the 62 stocks in the Solactive index, 37 have declined 20 per cent or more from Oct. 16, the day before legalization, through Tuesday’s close. Only one of the 62 - MPX Bioceutical Corp., a Toronto company that operates in Arizona - gained in that time.

Even with the recent declines, 43 of the 62 stocks in the Solactive index are up 20 per cent or more since the Aug. 14 Constellation-Canopy announcement.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 3:59pm EDT.

SymbolName% changeLast
WEED-T
Canopy Growth Corp
-9.96%11.66
ACB-T
Aurora Cannabis Inc
-7.92%5.93
STZ-N
Constellation Brands Inc
-0.1%271.76
HMMJ-T
Horizons Marijuana Life Sciences ETF
-1.87%10.99

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