As 2019 comes to a close, it’ll go down as a great year for the broader market and a miserable year for marijuana stocks. What’s so crazy about the latter is that pot stocks opened the year with jaw-dropping gains throughout the first quarter, but logged substantial double-digit declines since the end of March…
Pretty much everything that could go wrong has gone wrong for pot stocks. Supply issues in Canada have kept legal product from reaching consumers, while high tax rates in select U.S. states have made it impossible for legal weed to compete with the black market. As a result, marijuana stocks have continued to lose money at a time when most of Wall Street foresaw the industry pushing into the green.
NYSE delisting could be a real possibility for a handful of cannabis stocks in 2020
Pot stocks have a lot to be concerned with in the upcoming year, including pricing pressures and a persistent black market presence. But a handful of pot stocks can also add a possible delisting from the New York Stock Exchange (NYSE) to their growing list of concerns.
As some folks are likely aware, it’s not easy for marijuana stocks to uplist to, or go the initial public offering (IPO) route on, a major U.S. exchange, such as the NYSE or Nasdaq. Both exchanges have a laundry list of financial, volume, and other intangible factors that are considered when a company files the required paperwork to uplist from the over-the-counter (OTC) exchange or to do an IPO. But the real issue is that, since marijuana is an illicit substance in the U.S. at the federal level, no company that directly deals with the cannabis plant in the U.S. is allowed to list their common stock on the NYSE or Nasdaq. This factor, along with the financial and volume requirements, excludes most pot stocks from uplisting.
Nevertheless, more than a dozen direct and ancillary marijuana stocks have made the move over the past three years. In doing so, they’ve improved their visibility, bolstered their volume-based liquidity, and garnered far more Wall Street coverage and/or investments than they would have if they remained listed on the OTC exchange or remained private.
But for three pot stocks, this dream could being ending in 2020.
CannTrust Holdings
The most logical delisting candidate is Ontario-based CannTrust (NYSE:CTST), which is currently failing two ongoing listing requirements. This includes a share price that’s been below $1 per share for a period of 30 days, as well as the fact that the company hasn’t filed its quarterly operating results since May. Although both insufficiencies could get CannTrust booted from the NYSE, the latter is far more concerning. It’s likely the company will be shown the NYSE exit door in the first half of 2020.
As you may know, CannTrust dropped a bombshell on Wall Street in July by admitting that it illegally grew cannabis in five unlicensed rooms for a period of six months between October 2018 and March 2019. As a result of these findings, the company’s CEO was fired, and Health Canada suspended CannTrust’s cultivation and sales licenses in September. In theory, this leaves the door open for the company to regain its license in 2020, assuming it meets a laundry list of requirements laid out by Health Canada. But in the meantime, CannTrust is burning through cash and is unable to sell a gram of cannabis.
Even if CannTrust were to do a reverse split in order to get its share price back above $1, the fact that it’s failed to report its quarterly results looks to be the dooming factor that’ll banish it back to the OTC exchange…
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