Cronos stock plunges 30% after Citron short call, report of Trump anti-marijuana effort
Cannabis stocks dropped Thursday after famed short seller Andrew Left’s Citron Research published a “reality check” for Canada-based weed company Cronos Group Inc. and the rest of the sector, and a report of a federal effort to fight marijuana legalization.
Cronos CRON, -25.71% stock fell roughly 29% in Thursday trading, as Canada-based rivals Tilray Inc. TLRY, -8.18% slid 6.4%, and Canopy Growth Corp. CGC, -5.30% fell 3.8%. The S&P 500 index SPX, -0.35% was down 0.1% Thursday.
Weed stocks have rampaged in recent days — described by one investor as similar to a bitcoinBTCUSD, -3.16% surge — after a flurry of news related to beverage company interest in weed: After Corona-maker Constellation Brands Inc. STZ, +0.13% announced a $4 billion investment in Canopy, a report said that Smirnoff-maker Diageo PLCDEO, -0.65% was eyeing a similar investment or partnership in three other Canadian pot firms.
Citron’s note casts a dark shadow over recent gains in Cronos, warning investors that while the end of prohibition in Canada is real, when the market shakes out, the 100-plus licensed producers will not all end up on top. Citron says investors should be especially wary of Cronos because it isn’t disclosing the size of its agreements with the various Canadian provinces, unlike other major firms in the space. Several Canadian provinces have announced their supplier lists ahead of adult recreational legalization in that country taking effect Oct. 17.
See also: Weed beer is near, and it’s gonna get weird
Cronos has also had issues with contaminated products and, Citron says, international sales represent about 6% of the top line — though it’s worth pointing out that on Tilray’s earnings call Tuesday, Chief Financial Officer Mark Castaneda said that about 5% of Tilray’s sales came from outside of Canada. Citron also said Cronos doesn’t spent capital on research and development.
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Citron’s Thursday call came a day after a BuzzFeed story described how President Donald Trump’s administration has secretly amassed a committee of federal agencies — including the Drug Enforcement Administration, and the departments of Defense, Education, Transportation, Justice and Homeland Security — that the White House will use to combat public support for weed and negatively portray state-initiatives relating to legalizing the drug.
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