Cannabis plants are shown at Sundial Growers facility in Olds.Dean Pilling / Postmedia

It’s a business story as old as time.

Canada’s cannabis green-gold rush has gone bust.

It happened with Bre-X, with the dot.com bubble, with Nortel, with the American lending/real estate crash of 08-09.

Everybody gets super-excited over one or two companies, or a sector. Investors pile in. Rationale goes out the window. The shares double, triple, quadruple in value. Buy, buy, buy! We’re rich!!!!

And then it happens. Feast to famine. Hero to zero. The company cannot possibly produce the revenue to sustain such sky-high stock prices. The smart money starts to sell, the selling stampede starts, investors pile out. Usually the company (or companies) end up worthless and/or bankrupt.

STORY CONTINUES BELOW

Sadly, the stakes are higher in the Edmonton area. It’s not just a few thousand foolish folks who invested in cannabis companies without doing their research.

Aurora Cannabis, Canada’s second-biggest cannabis cultivation company, is headquartered here, grows and processes most of its product locally. The publicly traded Aurora shot up from 60 cents a share in 2016 to peak at $13 last April. Today, the shares are trading between $2.50 to $3 a share.

Shares in the biggest Canadian cannabis company, Canopy, were trading at $70 a share. Today they are at $31.

Privately held smaller cannabis-growing companies are facing a cash crunch, often before producing a darned thing. Investors are avoiding cannabis companies like the plague.

In October 2018, Canada legalized marijuana across the country.

Everybody wanted in. Aurora had been a small publicly traded cannabis company, licensed to grow cannabis for the medical market. When it announced plans to be a major cannabis producer once pot was legalized, investors couldn’t get enough of the stock.

Aurora ended up swimming in cash. Some three billion shares are out there today, and at its market peak, investors were paying up to $13 per share. Aurora spent that cash, buying up other cannabis and cannabis-related companies, building its gigantic Aurora Sky greenhouse beside the Edmonton International Airport, and starting to build (since halted) an equally big cannabis greenhouse in Medicine Hat.

Around Edmonton, freshly licensed cannabis-cultivation companies were being announced every week — usually raising money from private investors.

What happened?

The usual:  Too much supply, not enough demand.

The initial cannabis crop from Canada’s licensed-to-date producers was greater than expected.

The licensing and opening of retail cannabis stores was slower than anticipated, especially in Ontario.

Moreover, the marijuana being delivered to legitimate retailers wasn’t selling very well.  Being government-regulated, the THC levels (that which gets you high) were less potent than in the illegal pot that customers had long bought from black-market dealers.

Meanwhile, the inferior legal pot, at $10.43 a gram (mostly specialty-product taxes)  was twice as expensive as the high-THC illegal marijuana being sold in the back alley.

As the crash is happening, many recently licensed pot growers have yet to produce a single cannabis bud. Across Canada, some 400 companies are waiting for cannabis-growing permits.

Cultivators/retailers are pinning their hopes on Cannabis 2.0 — in the last few weeks, licensed retailers can now sell edibles, i.e. cannabis-brownies, cannabis vape pens and cannabis-infused beverages. The supply chain, however, will take several months to get those products to market.

So what will happen?  Aurora is losing money by the day, re-trenching, consolidating, halting expansion plans, trying to restructure its alarming debt and likely looking for a well-heeled global food & beverage partner to rescue this damsel in distress.

Some financial analysts think Aurora can pull out of its nose-dive and still become a pre-eminent global cannabis supplier. Others think the company is doomed, that it will be sold one-way-or-another to other major companies or investment groups for 10-cents-on-the-dollar. Those greenhouses by our airport could end up housing Canada’s biggest hothouse tomato crops.

“Nobody looked at what happened in those American states that legalized pot,” says one weary player in the new industry. “In Colorado, 100 companies were approved for cultivation. Eight remain.

“Same everywhere else. In a year or two, things will stabilize. But by then, most Canadian producers will have consolidated or gone bankrupt. Too bad so much of it is happening around Edmonton.”