Fortune reports


Maybe it’s just a sign that autumn is here, but marijuana stocks like Tilray and Aurora Cannabis have suddenly turned from green to red. Key stocks in the budding cannabis sector have lost more than 20% in the past week—a figure that is typically used to measure a bear market.

The biggest cannabis exchange-traded fund, the $750 million ETFMG Alternative Harvest ETF, fell 9.5% Monday, capping a 22% slump in the past five trading days. Meanwhile, the Horizons Marijuana Life Sciences ETF, which is traded on the Toronto Stock Exchange, fell 11.6% Monday and 24.3% in the past week. One week ago, both funds were at a record high. Now, both are down about 4% since the start of the year.

Some of the heaviest declines came in cannabis stocks that were favored by speculators. Tilray, the first weed company to list on the Nasdaq, fell as much as 21% at one point Monday afternoon before rebounding slightly to $122.60 at the market’s close, which marked a 16% decline on the day. OTC shares of Aurora Cannabis, which officially trades in Toronto and is planning an IPO on a U.S. exchange, fell as much as 20% before closing down 13% at $8.69 a share.

Tilray’s stock has lost 31% of its value in the past five trading days, while Aurora is down 29%.

With recreational marijuana becoming legal in more places, cannabis stocks have become something of a speculative fad this year, drawing comparisons to bitcoin because of speculative bubbles generated in what may well become viable markets in time.

Many cannabis stocks rallied as recreational marijuana became legal in California and other states and in anticipation of Canada’s move last week to legalize pot at the national level. Investment conferences, such as last month’s Cannabis Private Investment Summit in Toronto and the Institutional Capital & Cannabis Conference in New York, have also helped fuel interest in pot stocks.

It’s not uncommon for speculative stocks to start falling, somewhat paradoxically, once some long-anticipated piece of news comes to pass. That seems to have been the case with Canada’s move to legalize pot. Investors who had bid up pot stocks in recent weeks or months may have taken profits, prompting other investors to sell some shares once that profit taking began weighing down stock prices.

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