Why ASX cannabis shares are sinking lower on Monday

Why Auscann Group Holdings Ltd (ASX:AC8), Cann Group Ltd (ASX:CAN), and the cannabis industry is sinking lower on Monday…

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The market may be trading lower today, but one group of shares is falling more than most – the cannabis companies.

In early afternoon trade the cannabis industry is a sea of red as investors head for the exits in their droves.

Here's a summary of how pot stocks are performing today:

The Althea Group Holdings Ltd (ASX: AGH) share price is down over 2% to 45.5 cents.

The Auscann Group Holdings Ltd (ASX: AC8) share price has tumbled 5.5% to 25 cents.

The Cann Global Ltd (ASX: CGB) share price has fallen 6% to 1.6 cents.

The Cann Group Ltd (ASX: CAN) share price has crashed 11% to 88 cents.

The MMJ Group Holdings Ltd (ASX: MMJ) share price is down 5.5% to 17 cents.

Why are cannabis shares crashing lower?

Whilst a series of disappointing quarterly update from North American cannabis companies appears to be weighing on investor sentiment again this week, one particular piece of news seems to be hurting some companies more than most.

According to MarketWatch, Aurora Cannabis reported a sharp quarter on quarter decline in revenue during the September quarter.

It also advised that it plans to halt construction at one of its cannabis-growing facilities in Denmark and delay completing the final construction and activation of its Aurora Sun facility in Canada.

This follows its monitoring of demand for cannabis products in Canada and elsewhere around the world. Unfortunately for the industry, the demand just isn't as strong as many were expecting.

This could be particularly bad news for Cann Group. It is constructing two massive facilities in Victoria and has close ties with Aurora Cannabis.

In March it announced a five-year agreement with the Canadian cannabis giant for the offtake of medicinal cannabis produced by Cann at its existing and planned expansion facilities until 2024.

However, whether Aurora will have any use for this supply is up in the air given the softening demand and oversupply of product.

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.

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