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Buds & Duds: Cannabis stocks in sea of red as companies feel the pinch from cash crunch

MedMen Enterprises which climbed last week after announcing cost-cutting measures gave back all its gains

Constellation Brands - Buds & Duds: Cannabis stocks in sea of red as companies feel the pinch from cash crunch
E-cigarette products are damaging to lungs but may be safer than smoking cigarettes, according to a new long-term study

Cannabis indices were down Tuesday as a looming cash crunch is leaving some marijuana companies teetering on the verge of going bust.

The cannabis industry’s problems have become so dire that one senior executive at a large cannabis company told Bloomberg that as many as “a dozen smaller companies may fail” by the second quarter of 2020.

Meanwhile, e-cigarette products are damaging to lungs but may be safer than smoking cigarettes, according to a new long-term study published in the American Journal of Preventive Medicine. The same study, however, found that the riskiest behavior was among smokers who used both vaping products and cigarettes, which researchers said was common.

The North American Marijuana Index, which tracks the top cannabis stocks in the US and Canada, was down 2.3% to 112.92 points. Elsewhere, the Horizons Marijuana Life Sciences Index ETF was flat at C$9.11, while the OTCQX Cannabis index dropped nearly 3% to 416.95 points.

Duds

While the smallest players are most at risk, better-known companies are also running low on cash.

MedMen Enterprises Inc (OTCMKTS: MMNFF) said last week it reduced corporate staff by more than 40%. It also issued $27 million of shares at 43 cents each, 14% below the stock’s December 10 closing price.

The Los-Angeles cannabis retailer, which had initially climbed on the news, gave back most of its gains on Tuesday and was trading 14% lower at $0.61.

Aurora Cannabis Inc (NYSE:ACB) stock took a hit after Gordon Johnson of GLJ Research initiated coverage with a "Sell" rating. The analyst argued that "ACB's equity holds no value," and predicted that the company will become “utterly worthless by the end of 2021.” He assigned a two-year price target of $0 which shocked industry watchers.

Aurora Cannabis stock tumbled over 7% to $2.35 in New York and was down over 6.5% at $3.10 in Toronto.

Buds

Canopy Growth Corp (NYSE:CGC) climbed modestly on the back of lingering excitement created by the news that current CEO Mark Zekulin will step down to make way for Constellation Brands Inc's (NYSE:STZ) CFO David Klein. The leadership change will be effective from January 14, 2020.

Canopy Growth stock climbed 0.7% to $20.49 in New York.

Contact the author Uttara Choudhury at [email protected]

Follow her on Twitter: @UttaraProactive 

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