Why Pot Stocks Canopy Growth, Cronos Group, and Tilray Are Cratering Today

What happened

Canadian pot stocks are getting hit hard across the board today. As of 1:21 p.m. EDT, for example, shares of Canopy Growth Corporation (NYSE:CGC) and Cronos Group (NASDAQ:CRON) were both down by 11.2%, whereas Tilray‘s(NASDAQ:TLRY) stock had fallen by 14.4%. What’s going on?

Canopy, Cronos, and Tilray all seem to be succumbing to a so-called “sell the news” event. On Oct. 17, Canada officially opened the floodgates to allow adults to use marijuana for recreational purposes. Since then, however, Canopy, Cronos, and Tilray have all seen their share prices fall in dramatic fashion…

So what

This widespread sell-off shouldn’t be all that surprising to investors. Shares of these first three cannabis pioneers to list on major U.S. exchanges were going absolutely gangbusters leading up to this pivotal event. As a result, Canopy, Cronos, and Tilray had amassed a combined market capitalization of about $28 billion in the week prior to Canada’s official end to cannabis prohibition.

The underlying problem, however, is that Canadian pot sales — medical and recreational combined — are expected to peak at about $10 billion. And the far more lucrative United States market will probably remain off-limits, for the most part, until another administration takes office. In short, Canopy, Cronos, and Tilray all appear to have gotten way ahead of themselves from a valuation standpoint in the buildup to Canada’s move to legalize weed.

Now what

Unfortunately, these three names may not find a solid bottom anytime soon. The harsh reality is that the marijuana boom has..

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