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'Some of these people will disappear': Slump hits the cannabis industry


Jeremiah Rodriguez, Staff, with a report from Jon Erlichman from BNN Bloomberg

Published Friday, November 15, 2019 10:00 PM EST

On a day when the Canadian stock market reached an all-time high, cannabis company shares continued to decline.

Aurora Cannabis based in Edmonton is the latest producer to report disappointing financial results. Recreational weed sales fell 33 percent compared to the last quarter.

With increasing investor pressure, companies like Aurora cut costs where they can.

To save $ 190 million in planned costs, the company announced stopping the construction of a production facility in Medicine Hat, Alta. and stop working at other facilities.

In Montreal, Aurora Cannabis chairman Michael Singer told CTV News, "we are tightening our belts and we are very careful about spending."

For the cannabis industry, this is a dramatic change from the abundant investment hype seen over the past year leading to legalization.

Cuts are being felt in communities like Ontario's Niagara Region, where layoffs by the Hexo cannabis company have affected the city of Lincoln. The company cut 200 jobs last month, which is almost a quarter of its entire workforce.

Selling in Canada's five largest pot stocks has wiped out the $ 33 billion market value since May.

One of the biggest driving factors is the government's failed battle with the black market, companies burning cash and the slow launch of legal pot shops in markets like Ontario.


Industry analyst Andrew Kessner at equity research firm William O 'Neil told CTV News, "We don't think they will be able to raise money easily going forward. And in the end some of these people will disappear. "

Elsewhere in Ontario, shares of Mississauga-based Green Organic Dutchman dropped sharply after a $ 20.1 million third-quarter loss.

There are also a number of regulatory problems that have been caused by some producers themselves. The former CannTrust tall pamphlet was targeted by Health Canada for planting some marijuana before getting a license.

Other types of problems are mounting for fellow producers.

During a call with analyst Mark Zekulin, CEO of Canopy Growth Corp said it was "increasingly unlikely" that Canopy would reach its target of $ 250 million in revenue in the fiscal fourth quarter, which ended in March.

Zekulin also told BNN Bloomberg that his company misread the market for new products such as cannabis oil and gel capsules.

"The reality is we expect this to maybe 20 percent of the recreation market. It ends somewhere along the five percent line," he explained.

But the industry's positive spin for the current slump is "Cannabis 2.0" to come – monikers for launching things like cannabis gum, oil and other foodstuffs – which the company hopes to provide greater growth.

New regulations for edibles and topical cannabis came into force last month, but because the product approval process will not touch the legal market until mid-December – the earliest.

With files from The Canadian Press

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