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Why this ASX cannabis share is crashing 33% lower today

James Mickleboro
share market bear invest crash

It has been a terrible start to the week for the Cann Group Ltd (ASX: CAN) share price. The cannabis company’s shares are currently the worst performers on the All Ordinaries on Monday afternoon.

At one stage they were down by 33% to 49 cents. They have since narrowed this decline slightly, but are still down 27% to 53.5 cents at the time of writing.

As a comparison, the next worst performers are Nufarm Limited (ASX: NUF) and Pacific Current Group Ltd (ASX: PAC). They are down 18% and 8%, respectively, this afternoon.

Why is the Cann Group share price crashing lower?

Investors appear to be selling Cann Group’s shares today after looking over the production plans it announced last week.

Previously, the company was planning to complete the Mildura facility in a single stage development. This would give it a total capacity of 70,000 kgs of cannabis flower at an estimated project cost of $184 million.

This was expected to generate annual revenues of approximately $220 million to $280 million

However, in response to weaker than expected demand and an oversupply of cannabis, management intends to split its construction into three stages. It estimates that first stage production will be around 25,000 kgs.

And while management hasn’t updated its revenue forecast yet, I suspect the market is anticipating a sharp downgrade. Especially given the abundance of cannabis flower and the limited use that its offtake partner, Aurora Cannabis, has for it at present.

Other cannabis news.

It isn’t all doom and gloom in the cannabis industry on Monday. Both AusCann Group Holdings Ltd (ASX: AC8) and Botanix Pharmaceuticals Ltd (ASX: BOT) are up 4.5% following updates this morning.

The AusCann share price is up after appointing TGA-licensed Aspen Pharmacare Australia to provide packaging for its medicinal cannabis pharmaceutical products.

Whereas the Botanix share price is up after following a US DEA announcement. It advised Botanix’s partner Purisys, that its synthetic cannabidiol product is no longer scheduled as a controlled substance.

Botanix Executive Chairman, Vince Ippolito, believes this change will make a major difference to the speed of developing its products and greatly reduces the risks and costs of clinical development.

The post Why this ASX cannabis share is crashing 33% lower today appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019