Tilray Inc.’s stock tumbled 23% in early trade Friday, setting it up for a dramatic end to a turbulent week that saw the entire cannabis sector post strong gains and losses, sometimes in the same session.
The latest news on the Canadian full-service pot company is the push by a Florida Republican to block it from providing the substance for use in a clinical trial in the U.S. Tilray TLRY, -24.89% said earlier this week that the U.S. Drug Enforcement Administration has signed off on its plan to import a marijuana product from Canada in order to test its effectiveness in treating essential tremor, a neurological disease.
In an interview with MarketWatch on Thursday, U.S. Rep. Matt Gaetz said the U.S. has the opportunity to build its own cannabis industry and he sees little reason to divert potential wealth to Canada.
Read more: GOP congressman questions Tilray medical-cannabis imports to U.S.
Canada is gearing up for full legalization of cannabis on Oct. 17, and will become the first G-7 country to do so. U.S. entrepreneurs have expressed frustration at the federal government’s failure to revisit the drug’s classification, which groups cannabis along with heroin and cocaine as a Class 1 drug. That has hampered the development of the domestic industry as companies, already operating in those states that have voted to legalize the drug, are unable to have bank accounts which are federally backed, handing Canada a first-mover advantage.
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U.S. public support for marijuana legalization hit an all-time high of 68% in June, according to a poll, cited in High Times. But Attorney General Jeff Sessions is a longtime opponent of marijuana and reform of the existing rules is not expected as long as he holds that office.
Meanwhile, new entrants to what is expected to become a global market worth $200 billion over time are emerging every day with news of alliances and partnerships. Stocks, many of which trade on the over-the-counter market, have been experiencing strong swings for the past month in heavy volume, as investors suffering from FOMO, or fear of missing out, have jumped in. The sector action has drawn comparisons to the internet boom years or the explosion in cryptocurrencies of the last year.
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“With a bubble beginning to form comparable to bitcoin and even the ‘Dot Com’ bubble of the late 90’s the average investor is going to suffer,” said Ken Mahoney of Mahoney Asset Management in emailed comments. “With these frightening volatility levels and no previous history of stability, trading cannabis stock cannot be perceived as a sound long-term investment.”
Tilray shares have still gained 18% on the week and are up a stunning 222% in the last month.
Aleafia Health Inc. ALEF, +11.88% stock surged 11.4% on Friday, after announcing that it has been added to the Horizons Marijuana Life Sciences exchange-traded fund HMMJ, -3.78% The medical marijuana company has 50,000 patients using its product and is expecting to reach growing capacity of 38,000 kg of cannabis flower in 2019. That news comes a day after Aleafia announced a partnership with Cronos Group in a study of medical marijuana’s ability to treat insomnia.
Shares of Valens GroWorks Corp. MYMSF, +3.61% which is focused on cannabis extraction services, were up 2.3%. Colorado-based farmer GrowGeneration Corp. GRWG, +3.05% was up 3.2%.
The rest of the sector was lower, with Cronos Group Inc. CRON, -8.58% down 7%, Aurora Cannabis Inc. ACBFF, -2.16% ACB, -2.12% down 0.6% and Canopy Growth Corp. CGC, -4.75% was down 3.9%.
IAnthus Capital Holdings Inc. ITHUF, -3.41% was down 3.4%. The S&P 500 SPX, +0.20% was up 0.1%.
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