One of the last things that the CBD market expected to confront this year is a global pandemic but that is exactly what happened. The coronavirus COVID-19 is blasting economies across the globe and economies have to face very tough times.
Damage to the Economies
The outbreak of the coronavirus has sent the global economy into a downward spiral, dragging with it all the markets, including that of cannabis and all cannabis-related derivatives. For those who invested in cannabis stocks via exchange-traded funds, it has not been the best of times. Brands like Horizons Marijuana Life Sciences Index ETF (TSX:HMMJu), Alternative Harvest (NYSE:MJ)and a host of others suffered steady plunges until their stocks reached an all-time low. It was nothing but bad news for the investors and other stakeholders.
Viral Pandemic Slams CBD Sector
In the United States, the cannabis industry took a particularly bad hit. Starting from the spring of 2019, sales started nosediving, debt profiles became worse and regulations did not help. All sectors of cannabis and cannabis derivates. Supply chains became disrupted and spending by customers dropped off rapidly as the virus spread swiftly from China to other parts of the globe.
Interestingly, the popularity of CBD brands remained consistent with the populace even if that did not necessarily translate to higher volumes of sales or maximization of revenue for these enterprises. The same thing applied to the Juice brands and markets. The rate of popularity remains constant especially concerning opinion surveys conducted among investors in the retail sector of the market. What this implies is that the market is more susceptible to the uncertainties in customer preference.
Evolving Influence on CBD Brands
Other prominent brands in the CBD niche that took the hit include Canopy Growth (NYSE:CGC), Tilray (NASDAQ:TLRY), and Cronos Group (NASDAQ:CRON). But that said, it cannot be said that it is all doom and gloom. Of late, there have been some positive signs even if it is not clear whether that is going to be sustained or not. However, what is apparent at the moment is that there is some improvement with the exchange-traded funds and investors are seeing some levels of optimism.
Several funds are not experiencing the same level of outflows that the stock plunges would reflect. What this suggests is that the fund investors are going to keep experiencing bull runs. Investors are preferring to go for investments that will perform better over the long-term.
Delayed Offers and Slowed Growth
In other parts of the globe, the coronavirus outbreak is delaying the initial public offer. A very good example in this regard is the New York-based CanaFarm Hemp Products had its trading delayed on the Canadian Securities Exchange (CSE). The date for the listing had to be changed because the company made the specific request. This was particularly because of the coronavirus pandemic which is shaking the global economy to its foundations.
It is expected that the delay is also going to affect the issuance of new shares to the investors. CanaFarma, a brand that is known for its CBD/hemp oil-infused chewing gum is going to trade under the name ‘CNFA’. Established in early 2019, the brand stated that it was going to go ahead with a reverse takeover in partnership with KYC Technology.
Another aspect where the pandemic has affected the CBD industry is in the area of insurance policies. Even though many cannabis ventures have general liability insurance packages in place, these packages have no provisions for business disruptions or a pandemic like the one they are witnessing now. There is also a drop in productivity as workers can no longer work and many have been forced to have their CBD businesses shut down till further notice.