Monday saw a good session on Wall Street, as major benchmarks came back from the Thanksgiving holiday with gains of around 1.5% to 2%. Investors generally seemed pleased with the pace of economic activity during the most watched shopping period of the year in the U.S., and a host of beaten-down high-profile names recovered from their worst losses of the stock market's correction since late September. Yet not every company managed to see enough good news to support its share price. Aurora Cannabis (ACB -2.40%), Zafgen (ZFGN), and Overstock.com (OSTK -0.69%) were among the worst performers on the day. Here's why they did so poorly.
Aurora goes through growing pains
Shares of Aurora Cannabis dropped 6% on a poor day for many key stocks in the cannabis sector. News from Canada suggests that producers like Aurora simply aren't growing enough marijuana to meet the huge demand from the recent rollout of recreational pot, and deliveries to provincial retailers have thus far fallen well short of expectations. In its defense, Aurora has said that much of the blame lies with the provinces themselves, which haven't worked as well in establishing retail cannabis sales as many had hoped. Regardless of the cause, however, marijuana investors are nervous that Aurora and its peers might not live up to the huge expectations the market has for their prospects.
Zafgen takes an FDA hit
The stock of biotech specialist Zafgen (ZFGN) plunged more than 40% after the company announced that the U.S. Food and Drug Administration had forced it to stop testing its ZGN-1061 experimental treatment for type 2 diabetes. The clinical hold stemmed from safety concerns about another Zafgen drug called beloranib, which caused deaths in several study participants. The FDA wants Zafgen to show how it will deal with any similar issues with ZGN-1061, and the company responded by saying it expects to meet with the FDA to discuss further steps. Investors didn't like the potential delay that would cause in getting approval in the U.S., and there's no guarantee that Zafgen will be able to come up with a plan of action that will address all of the FDA's concerns.
Overstock gives back its gains
Finally, Overstock.com shares fell 16%. The e-commerce company had jumped substantially after CEO Patrick Byrne announced that Overstock would sell off its retail operations and turn all of its attention to its opportunities related to blockchain technology. However, investors apparently had time to digest the implications of the strategic move further over the weekend. The fact that bitcoin and many other cryptocurrencies have lost 80% to 90% or more of their value since early 2018 shows just how much risk's involved in the cryptocurrency-based business model that Overstock intends to adopt.