Cannabis company Hydroponics Company Ltd sinks 11% lower

Although the local market was a sea of red on Tuesday, a few shares stood out with larger than average declines.

One of these was the Hydroponics Company Ltd (ASX: THC) share price. The diversified cannabis company’s shares finished the day down over 11% to 71.5 cents. This brought its two-day decline to approximately 17%.

Why were its shares lower?

Almost all of the medicinal cannabis shares tumbled lower today as investors went into risk-off mode following sharp falls in the United States.

The Auscann Group Holdings Ltd (ASX: AC8) share price, for example, fell 13.5% and the Cann Group Ltd (ASX: CAN) share price sank 5% lower.

Medicinal cannabis companies have been some of the worst performers on the market largely due to the fact that they a significant amount of growth built into their shares already and have generated little by way of revenue. This puts them at the high-end of the risk scale.

It hasn’t just been Australian cannabis shares feeling the brunt of this sell-off. As we mentioned yesterday, Canadian cannabis giant Canopy Growth Corp has lost C$500 million off its market capitalisation over the last few days.

It will be interesting to see how the industry reacts tomorrow. No doubt it will be a big move one way or another.

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Motley Fool contributor Motley Fool Staff has no position in any 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 Bruce Jackson.

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