The ASX pot stock sector ran hot in 2018 on not much more than media hype, companies spinning stories, and plenty of less-sophisticated investors buying into them.
The sector didn't run higher on share market fundamentals as there were none.
Most of the 'pot stocks' had no revenues let alone profits.
Let's take a look at a couple, among many, that have tanked (as warned) over 2019.
Auscann Group Holdings Ltd (ASX: AC8) is down 64% over the past year and it's not hard to see why this former media darling has crumbled. The company has no sales revenue from products and made a loss of $7.65 million over fiscal 2019. Its CEO also quit during the fiscal year after spending much time prior boasting to the media what a great 'medical marijuana' story the business was.
It does have $35.3 million cash on hand in its favour and it reported the three points below as the "highlights" of its June 2019 quarter.
The stock changes hands for 36 cents today and on the evidence above I would not suggest investing your money in this business..
Cann Group Holdings Ltd (ASX: CAN) is actually one of the more credible pot stocks on the local market, but the shares are still down 43% over the past year.
It took in sales revenue of $1.46 million on an operational loss of $2.08 million over the June quarter with $46.4 million cash on hand. It also spent $14.8 million on investing activities over the quarter partly to expand its industrial cannabis production plants in Victoria. As a result of what will be its increased production capacity it boasts it can generate massive revenues down the line.
Based on 141.8 million shares on issue it has a market value of $217 million on today's reduced share price of $1.53.
It looks streets ahead of Auscann and others as a 'pot stock', but whether its valuation proves hot air is up for debate.
