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In One Chart - October 17, 2018

In One Chart: Canada Legalizes Recreational Marijuana

The day is Wednesday October 17, 2018 and recreational marijuana is legal in Canada.

While share prices for the major marijuana producers are up huge in 2018, the days leading up to legalization have been representative of the industry’s performance on the whole. The marijuana industry is many things — young, burgeoning, volatile, speculative — the list goes on.

At the same time, many are cautious to hop on the cannabis train due to extreme volatility. Tilray (TLRY), the largest marijuana producer by market cap, has been a roller coaster ride thus far with a max drawdown in excess of 50%. Then again, it’s backed by Peter Thiel’s Privateer Holdings and up almost 570% since its July IPO.

Some have attributed the industry’s volatility to the high percentages of retail ownership. The chart below shows the five major marijuana producers’ market cap and institutional ownership percentage.

Bruce Linton, CEO of Canopy Growth Corp. (CGC), the second largest pot producer by market cap, says that October 17th will be Canada’s new Thanksgiving. This is a common viewpoint for optimists who say the big picture, legalization and international growth, will send the industry higher. We recently profiled all the ways public companies are involved in the marijuana industry, found here.

Canada’s provinces each oversee the sale of recreational marijuana within their borders, but are currently behind schedule in opening government-run stores and licensed shops. Believers and skeptics alike are looking to early 2019, when the first quarters of recreational sales are reported. Time will tell whether Canada’s marijuana business blossoms or dries up.

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