The year 2020 is expected to be a big one for cannabis stocks. At the same time, there will be some tough times ahead for companies already struggling throughout 2019.
In the case of Aurora and Hexo, two Canadian cannabis stocks, things are not going according to plan.
Aurora Makes an Announcement
It is evident that some cannabis stocks will drag down the overall market. This week, it appears that Hexo Corp and Aurora Cannabis Inc will be the culprits. The latter company confirms it will sell its Ontario greenhouse. This measure is taken to reduce overall operational costs.
The greenhouse is currently listed on the market for CA$17 million. A rather strange price point, given the company’s expectations for this location. Initially, it was assessed that this location would produce at least 105,000 kilograms or marijuana per year.
Those hopes have now been given up completely. An unfortunate development for investors in this company. Their response came in the form of driving the stock price down by 5% yesterday.
This announcement is not entirely surprising either. Aurora has failed to license the facility in an official capacity. Moreover, with no cannabis grown there being sold, things have looked bleak for a while. There always comes a point when it is best to cut losses and move on.
Speaking of cutting losses, Aurora made some interesting decisions. In 2019, the company halted construction on a facility in Europe. One of their other constructions in Canada was also halted. All of these cost-cutting measures appear direly needed to keep the company afloat.
Hexo and Others Drop in Value
Aurora Cannabis Inc is not the only cannabis stock to struggle in early 2020. Hexo’s price fell by 6.3% yesterday. Other Canadian cannabis companies suffer losses between 3.1% and 5.16%. This initial trouble during the new decade was predicted by market analysts.
Overcoming this initial deficit will be a major challenge. It is not unlikely that some smaller companies will need to merge with others to survive. The question becomes which of these companies will remain standing in the end.