The Pot Stock Bubble Has Burst. Now What?

Resistance to widespread legalization and financial backing continue to dampen growth.

When California voted to legalize recreational cannabis use a couple years ago, the legal pot industry had reason for excitement. One of the most populous and wealthy states in the U.S. was opening its golden gate to an already budding industry. Despite an early surge in growth and enthusiasm, the overall outlook for business isn’t as sunny, at least right now, according to Bloomberg.

“It wasn’t that long ago that the cannabis industry was cruising. Big markets like Canada and California had legalized recreational use, while populous states such as New York and New Jersey were expected to follow suit. This had executives and analysts forecasting sales in the tens of billions of dollars within a few years, sending stocks to valuations that even some in the industry warned were too high.

“But legalization hasn’t been the trigger to invest that many expected. Canada’s biggest provinces have allowed few retail stores to open, while companies have struggled to develop the right mix of products. In California, the legal market has had to contend with high taxes and a well-established illicit market. Legalization efforts in other states have stalled.”