Shares in major cannabis companies sell off sharply

Shares of major cannabis companies in Canada sharply plummeted throughout the week as investors began to pull out of the sector.

Among the bigger players include cannabis giants like Canopy Growth (TSX: WEED), Tilray, Aurora Cannabis (TSX: ACB), Aphria (TSX: APH) and Tilray (NASDAQ: TLRY).

On Monday, Canopy Growth lost more than 11 per cent to close at $54.46 on the TSX, while Aurora Cannabis fared even worse, down 12 per cent to $11.42 a share. Aphria Inc. was off by more than 13 per cent to $15.77 a share, while Nasdaq-listed Tilray fared worst of all, down more than 15 per cent to $122.60 a share, according to CBC News.

Just little over a week ago, recreational cannabis was legalized entirely in Canada, which was a major anticipated event since a bill was passed over the summer.

The run-up to the event caused cannabis stocks to rocket. Cannabis retailers businesses were booming on the day of legalization, which caused many to sell out early on.

The plummet in cannabis stocks could be correlated to many businesses not being able to meet the demand of the consumers.

Stuart Rolfe at Veritas Investment Research Corp. says the extended period of declining cannabis stocks isn’t just a short period, but will drag on. Rolfe holds a sell rating for the cannabis sector.

“There might be nothing to pin the selling on,” he said, but on the whole, he thinks the sector is overvalued to begin with. “I learned awhile back that overvaluation is the meanest of catalysts,”