After 2019 proved to be a turmoil year for cannabis stocks, investors started to focus on a 2020 rebound. Unfortunately, that rebound isn't happening. High tax rates in the United States have created problems for operators, as has the coronavirus, which has halted many company's relationships with Chinese manufacturers.
As if that wasn't enough, there are also a few cannabis stocks that may face delisting from a major exchange this year.
Cannabis Stocks That May Face Delisting in 2020
As of February 18, 2020, despite the amount of capital raised in the industry bouncing back, cannabis stocks remain near all-time lows.
Concerning enough as is, some cannabis stocks still have more to worry about than others. Some are facing a possible delisting in 2020 for not meeting specified listing requirements, while others are getting close to not meeting those requirements but haven't quite dipped below the line yet.
1. CannTrust Holdings
A possible delisting is not the only reason CannTrust Holdings (TSX:TRST) (NYSE:CTST) has been in the news in recent times. We probably all remember when it broke that the company was illegally growing cannabis in unlicensed grow rooms at its Niagara campus, right? Right: it's hard to forget that one. And yet, the resulting suspension of its cultivation and sales licenses is not the only reason why CannTrust might face delisting from both the NYSE and TSX in 2020.
Not having these licenses means the company can't generate revenue. That's why CannTrust hasn't reported operating results in over ten months. That's not ideal for a company wanting to progress forward, but it's also not the only reason why CannTrust is in trouble. On the NYSE, CTST has been closing below the $1.00 minimum share price requirement for continued listing. It did that as of February 12, and today is no different: at the time of writing, CTST stock is currently trading at $0.8445.
In addition to not meeting the minimum trading amount, CannTrust has also been unable to file its operating results, which is another significant requirement for continued listing on the NYSE. Take this with the fact that the company announced more than 130 layoffs during Q4 2019, CannTrust has several situations it has to resolve this year—or it very well might get the boot from the New York Stock Exchange and possibly even the Toronto Stock Exchange as well.
2. Sundial Growers
Sundial Growers (NASDAQ:SNDL) is lucky in the sense that, unlike CannTrust Holdings, it has not received a noncompliance notice from the New York Stock Exchange. But that doesn't mean it's in the clear of the delisting zone. Sundial Growers is another cannabis stock pushing it when it comes to the minimum $1.00 share price for continued listing on the Nasdaq. At the time of writing, the cannabis stock is only $0.32 above the cutoff point.
Yes, it's above, but that's still not a confident figure to oust the company and investor delisting fears. Then again, a lack of confidence from investors might be part of the problem, sparked by the abrupt resignation of the company's CEO at the start of 2020, as well as having a notable order returned by Zenabis Global (TSX:ZENA) (OTCPK:ZBISF).
Barely meeting the minimum share price for continued listing, on top of a lack of positives for the company moving forward, the cannabis market really should prepare themselves for the possibility of Sundial Growers seeing a delisting in 2020. Of course, so long as it remains trading above $1.00, this won't happen.
HEXO (TSX:HEXO) (NYSE:HEXO) may not need to panic like CannTrust Holdings, being that its problems have nothing to do with fraud and everything to do with Canada's supply problems. If things turn around in the country, maybe things will also turn around for the Quebec-based company. That said, HEXO is on a bit of a time restriction: it's already close to failing to meet the minimum share price on the NYSE, and if it continues to do so, the NYSE might get in touch about the cannabis stock facing a delisting.
On February 12, HEXO stock closed at $1.25. That's a mere $0.25 away from breaching the requirement. At the time of writing, as of 1:27 PM EDT, the cannabis stock is trading at $1.46. Despite being an improvement from last week, it's still a cause for concern. However, just like Sundial, if HEXO can keep its stock above $1.00, then a delisting will not be part of its future.
Keep an Eye Out
It should be reiterated that only CannTrust has received a warning from a major exchange about a delisting.
Still, that doesn't mean other cannabis stocks won't at some point in 2020. And if Sundial and HEXO keep going the way that they are, it won't be surprising if it's these names that are the focus of the exchange's next noncompliance notice.
Do you think CannTrust will be able to turn things around and remain listed on the NYSE? Will Sundial and HEXO manage to stay above $1.00?
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