After two years of growth and high stock prices, cannabis stocks have plummeted by 50%. The lack of progress for U.S. federal legalization is frequently cited as the cause for investors to flee cannabis-related stock offerings.

“There’s been an absence of tangible headlines and progress out of Capitol Hill,” said Vivien Azer, cannabis analyst at Cowen & Co. 

Retail investment has likewise taken a hit. During the peak in February 2021, data shows retail investors bought over $2.5 billion of pot stocks in a week. Since then, investments have been as low as $73 million during one week in August.

“Retail investors became impatient with the lack of clarity and slow changes that are taking place in Washington,” said Charles Taerk, chief executive officer of Faircourt Asset Management, which acts as an adviser to the cannabis-focused Ninepoint Alternative Health Fund.

COVID-19, economic recovery, infrastructure spending, and even climate change may have combined to push cannabis reform lower on the priority list for the Biden administration. And, similar to the cult-like sector of cryptocurrency, cannabis investments fluctuate wildly seemingly with each news cycle.

Despite all of that, industry fundamentals are strong, especially for companies with operations in multiple U.S. states (multistate operators or MSOs). Most MSOs reported second-quarter sequential revenue growth. And with more and more states working toward the legalization of recreational marijuana federal marijuana reform becomes more likely.

“At a minimum, it makes the valuations that much more interesting, that the companies continue to grow their revenues and profits regardless of what happens on Capitol Hill,” said Azer.