Why Aurora Cannabis, Cronos Group, and Canopy Growth Plunged in July

Shares of Aurora Cannabis (NYSE: ACB), Cronos Group (NASDAQ: CRON), and Canopy Growth (NYSE: CGC) all fell more than 13% last month, according to data provided by S&P Global Market Intelligence, after a regulatory scandal spooked investors.

Cannabis stocks were rocked by the news that Canadian producer CannTrust Holdings (NYSE: CTST) was busted by regulators for illegally growing cannabis in unlicensed rooms. Soon thereafter, CannTrust fired its CEO. Worse still, the company suspended its sales of cannabis products and is facing disciplinary measures by Health Canada that could include a loss of its production license.

The CannTrust debacle highlighted some of the risks inherent in cannabis investing. While it's unlikely that Aurora, Cronos, or Canopy Growth would make the same mistakes as CannTrust, investors appear to now be pricing the possibility of compliance failures into their valuations of cannabis stocks.

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Source Fool.com