Please ensure Javascript is enabled for purposes of website accessibility

Why Aurora Cannabis, Zafgen, and Slumped Today

By Dan Caplinger – Nov 26, 2018 at 4:37PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Here's how these stocks missed out on a positive day for the market.

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 (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.

Large greenhouse facility with long rows of cannabis plants growing under lights.

Image source: Aurora Cannabis.

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, 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.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned, Inc. Stock Quote, Inc.
$24.35 (-0.69%) $0.17
Zafgen, Inc. Stock Quote
Zafgen, Inc.
Aurora Cannabis Stock Quote
Aurora Cannabis
$1.22 (-2.40%) $0.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.