The marijuana investment boom in the stock market has come to an end, writes Bloomberg. Interest in what appeared to be a promising industry is fading following hopes for federal legalization of cannabis in the United States. Investors still waiting for profits are missing opportunities to make money on other assets, analysts say;

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The value of AdvisorShares Pure US Cannabis ETF - the largest exchange-traded fund tracking the cannabis industry - has fallen 96% from its peak in February 2021. The collapse came after an equally meteoric rise, Bloomberg notes. Five years ago, traders expected the industry to take off when the U.S. legalized cannabis for non-medical use at the federal level, following the example of Canada. However, those hopes have not materialized, and with Donald Trump back in the White House, prospects for legalization remain extremely weak, the agency said.

«The promised legalization was a carrot that was teased to the industry for years, but it ended up being a mirage,» said Roth Capital Partners analyst Bill Kirk, as quoted by Bloomberg. - If there's any of that carrot left, it rotted away long ago. No one is chasing it anymore - the belief that it will ever happen is just gone.»

Growing pessimism among traders has particularly affected producers from Canada, where much of the industry is centered. For example, Ontario-based cannabis producer Tilray Brands was worth nearly $20 billion when it went public in 2018 and is now worth less than $500 million.Since the start of 2025, Tilray's stock has lost more than 70% and has become the worst-performing stock in Canada's main stock index, the S&P/TSX Composite. They will be delisted from it in July.  

 Even big players that used to show interest in the industry are now gradually retreating. For example, last year, alcohol giant Constellation Brands (owner of the Corona and Modelo brands) stepped down from the board of directors of Canada's Canopy Growth and converted its shares to non-voting shares. And in 2022, tobacco company Altria (maker of Marlboro) wrote off $483 million in losses on its investment in Canadian cannabis company Cronos Group.

What's in store for investors

Additional pressure on the industry comes from the companies' leverage - according to Viridian Capital Advisors, publicly traded cannabis producers will have to repay about $2.6 billion in 2026. A wave of consolidation will be necessary for the industry to survive, according to Bloomberg Intelligence analyst Kenneth Shea. Cannabis companies could become targets for private equity funds to merge into more sustainable structures, he suggests. «There are too many competitors chasing too little money,» Shea notes. - But the problem is that because of ineffective regulation, it's unclear whether it will even make a return.»

Company valuations are justifiably low due to weak fundamentals and dim prospects, notes Morningstar Investments analyst Kristoffer Inton. According to him, investors are essentially investing in companies that are closer to venture capital companies in terms of risk or should remain private at all.

«Even if you believe things will turn around someday and are willing to tolerate volatility, you can't forget the opportunity cost,» says Inton. - While you wait, the rest of the market is generally performing well. If you had invested in, say, a regular index fund, you would have been in the black long ago - but as it is, you're just missing time and opportunities.

 

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