The Motley Fool

Is this why the AusCann Group Holdings Ltd (ASX:AC8) share price fell 14%?

One of the worst performers on the market on Wednesday was the AusCann Group Holdings Ltd (ASX: AC8) share price.

The medicinal cannabis company’s shares finished the day down by almost 14% at $1.08. Whereas industry peers Cann Group Ltd (ASX: CAN) and MMJ Phytotech Ltd (ASX: MMJ) posted gains.

Why did the AusCann Group share price plunge lower?

With no news out of AusCann, the decline is a little bit of a mystery. Whilst some have speculated that it is tax loss selling, I think it could be related to news that Canada has legalised recreational cannabis use.

Although this might seem like a positive event, there is a bit of a twist that could make it a negative for some cannabis companies.

Legalising cannabis contravenes Canada’s pledge to adhere to existing drug-control conventions set by the UN.

In a chat with CEO Dr Elaine Darby a few months ago, I understood that such a move could lead to Canada being restricted from exporting narcotics such as cannabis.

This could potentially mean that the future importation of Canopy Growth Corp products is under threat.

As per its April announcement, AusCann is importing products for chronic and neuropathic pain control known as AC 5:5, AC 0:9.5, and AC 15:0. In addition to this, it was working on developing an arrangement where Canopy would supply AusCann with Spectrum Cannabis branded products to distribute into the Australian market alongside existing AusCann products.

All being well AusCann has already imported these products and is fully stocked up, but judging by its share price decline today, some may fear it may not have.

In light of this, I think it may be prudent for investors to stay clear of its shares for the time being while the situation develops and more details are known.

Though, it is worth pointing out that after the market closed AusCann responded to an ASX price query by advising that it “is not aware of any information concerning it which has not been announced to the market which, if known by some in the market, could explain the recent trading in its securities.”

Instead of cannabis shares investors may want to take a look at these hot stocks that are tipped to shine.

4 Stocks for Building Wealth After 50

Renowned investor Scott Phillips just released a brand-new report detailing his 4 favourite stocks to buy right now.

And I don’t know about you, but I always pay attention when some of the best investors in the world give me a stock tip.

This is your chance to get in at the very beginning of what could prove to be very special investments.

Click here to get started today!

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.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.