Curaleaf Stock Falls 10%: Is the FDA Scandal Something to Worry About?

Curaleaf stock

Curaleaf stock is one of the biggest losers in the cannabis sector this week after Curaleaf Holdings (CSE:CURA) (OTCQX:CURLF) received a warning letter from the FDA.

Disappointment for Investors

Curaleaf has managed to grow into one of the larger companies in the cannabis industry, and it has also made rapid strides in the CBD space, which is primed to become a huge industry of its own. However, the company had a major setback this week after it emerged that it had received a warning letter from the United States Food and Drug Administration. In the letter, the FDA stated that the company had been claiming that its CBD products could be used to treat serious health conditions and that goes completely against the existing regulations.

In its press release, the acting commissioner of the FDA stated, “Selling unapproved products with unsubstantiated therapeutic claims — such as claims that CBD products can treat serious diseases and conditions — can put patients and consumers at risk by leading them to put off important medical care.” It goes without saying that it is a serious issue for the company. Curaleaf Holdings stated that the letter is being reviewed and the company was going to respond to it in 15 business days.

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After the announcement, there was a significant selloff in Curaleaf stock, which closed 7% lower on Tuesday. In fact, CURLF stock is down 10% since the announcement.

What are Analysts Saying?

However, analysts claim that this could in fact be a buying opportunity in one of the biggest cannabis companies in the world. Russell Stanley, who is an analyst at Beacon Securities, stated that at this point of time, the CBD business does not even represent 1% of the revenues generated by the company. As a result, the effect of any potential FDA embargo on the CBD products is possibly overstated. In addition to that, he went on to state that the company would not have to pay a lot of money as a fine if the FDA decides to penalize the firm. Curaleaf Holdings has also committed to co-operating with the FDA during these proceedings.

At the time of writing, Curaleaf stock is down 2.60% at $7.20 on the OTC market.

The stock had one of the biggest one-day gains last week after announcing an acquisition of GR Companies.

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