The cannabis sector has hit a summer slump, weighed down by a series of scandals, regulatory deadlock and a growing sense that the industry is not delivering the gold rush-like returns that some investors were expecting.
The ETFMG Alternative Harvest ETF MJ, +0.74% has fallen 17% in the last three months, as the major stock benchmarks have stretched to fresh highs. The S&P 500 SPX, +0.74% and Dow Jones Industrial Average DJIA, +0.19% have gained about 3% in that time frame and hit record levels.
The slump comes after some unsettling events, including a recent crop of weaker-than-expected earnings from the Canadian licensed players, a full nine months into legalized recreational cannabis. The ousting of Bruce Linton from market leader Canopy Growth Corp. CGC, -0.74% WEED, -0.61%, the scandal involving illegal growing at CannTrust Holdings Inc. CTST, +16.92% TRST, +16.67% and this week’s regulatory crackdown on Curaleaf Holdings Inc.’s CBD products have added to the downdraft.
“All of those hits are hurting momentum,” said Rob Di Pisa, co-chair of the Cannabis Law Group at law firm Cole Schotz. “It’s just been one thing after another.”