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ARTICLE · 21 FEBRUARY 2020

Canadian Cannabis Companies Come Under Fire

In the 12 months leading to legalization in October 2018, Canadian public companies already in the medical cannabis space experienced "jaw-dropping growth" in their market capitalizations, notwithstanding that many reported negative earnings.

CanadaCannabis & Hemp

The Canadian capital markets landscape

In the 12 months leading to legalization in October 2018, Canadian public companies already in the medical cannabis space experienced "jaw-dropping growth" in their market capitalizations, notwithstanding that many reported negative earnings.1 A significant volume of merger and acquisition (M&A) activity was also observed, often involving surprisingly high valuation multiples based at least in part on what may have been overly optimistic predictions of consumer demand. Initial investor interest was primarily retail, and exceptionally strong notwithstanding the speculative nature of investment in this new and unproven industry.

Unfortunately, investors' high expectations for the cannabis market in Canada have been dampened over the course of the last year. The levels of sales initially predicted have not been achieved for a variety of reasons, including the small number of retail outlets initially opened in most provinces, the

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