Marijuana stocks have had themselves an incredible run to begin 2019, and as a whole have been pretty much unstoppable since the start of 2016. Since this year began, through March 6, the Horizons Marijuana Life Sciences ETF, the first-ever cannabis exchange-traded fund, is up 58% year to date.

It's pretty easy for investors to get excited about the pot industry, with 38% global sales growth predicted in 2019 by Arcview Market Research and BDS Analytics, and Wall Street investment banks like Cowen Group calling for $75 billion in global annual sales by 2030. Those dollars have to go somewhere, which suggests that the legal weed industry could have quite a few long-term winners.

A person holding up a cannabis leaf in the middle of an indoor grow farm.

Image source: Getty Images.

The cannabis industry isn't without risks

But the marijuana industry isn't without risks. For example, the push to expand and keep up with peers has led to a lot of share-based dilution for North American marijuana stocks. Having minimal access to non-dilutive forms of financing (i.e., bank lines of credit or loans), most pot stocks have had to turn to the secondary market to raise capital. This means selling stock, options, warrants, or convertible debentures, which can adversely impact shareholders and drag down earnings per share (for profitable companies).

Supply has also been a pretty consistent problem in Canada and select adult-use U.S. states. In Canada, regulatory agency Health Canada is bogged down by cultivation license and sales permit applications, which has delayed new product reaching dispensary shelves and online stores. Meanwhile, in the U.S., rampant oversupply and regulatory red tape have led to the rapid decline in per-gram dried cannabis flower pricing in Colorado, Washington, and Oregon.

Another concern, which often flies under the radar, is lock-up expirations. When a company goes public, insiders (e.g., executives, board members, and pre-IPO shareholders) aren't legally allowed to sell their shares for a period of 180 days. This "lock-up period" is to prevent fraud, whereby insiders of a newly public company immediately sell stock to an unsuspecting public for a profit, leaving the public holding the bag, so to speak. When lock-up periods expire after 180 days, insiders are free to sell some or all of their stake, should they choose.

A half-emptied hourglass on a table next to a calendar.

Image source: Getty Images.

Three pot stocks are set to face a potentially dreaded lock-up expiration by mid-May

Arguably the most "famous" marijuana lock-up expiration came from Tilray (NASDAQ:TLRY) in mid-January. You could rightly say that Tilray lucked out, in that private-equity fund Privateer Holdings, which owns close to 80% of all outstanding shares of the company, announced that it wouldn't consider selling any of its stake until the second half of this year. However, it still left about 10% of Tilray's outstanding share count available for sale by insiders. On the day of its lock-up expiration, the company lost 17% of its value and quickly reminded investors of the dangers of both recently public companies and the highly volatile pot industry.

As we look ahead, there are three more marijuana stocks readying for their lock-up expirations over the next (roughly) two months. 

Check out the latest earnings call transcripts for the companies we cover.

Curaleaf Holdings

First up will be vertically integrated, U.S.-focused cannabis dispensary operator Curaleaf Holdings (OTC:CURLF) on April 27. Approximately 385 million shares of the company's Canadian-listed stock will be freely tradable on that date, representing an unlocking of about 85% of the company's outstanding shares. Curaleaf's stock is up about 9% since its initial close back in November, which may encourage some insiders to sell their stock.

It's tough to tell what sort of reaction this lock-up expiration will incite among the investment community. On the one hand, it's one of the most recognizable brand names in the dispensary space, with an acquisition in California set to expand Curaleaf's reach to 13 states. Already operating 42 dispensaries, 12 cultivation sites, and 10 processing facilities, Curaleaf is cementing itself as a force to be reckoned with. 

On the other hand, Curaleaf is losing a lot of money, given its need to acquire new cultivation sites and dispensaries, rather than risk losing market share by waiting weeks or months for licenses and permits to be approved by regulatory agencies within a respective state. Renovating buildings and constructing facilities is also extremely costly, which could bite into the company's bottom line in 2019 and perhaps 2020. It's anyone's guess what happens come April 27.

A cannabis processor holding a freshly trimmed bud in their gloved left hand.

Image source: Getty Images.

Acreage Holdings

Next up will be vertically integrated cannabis company Acreage Holdings (OTC:ACRGF), which is expected to see 96 million shares become freely tradable in Canada on May 14. That represents approximately 88% of the company's outstanding share count. With Acreage Holdings down by close to a double-digit percentage since it first debuted as a public company, this lock-up expiration may apply even more pressure on its share price.

Like Curaleaf, Acreage's reach within the U.S. is impressive. The company currently has operations in 14 states, with licenses in place to ultimately expand to 19 states. These operations primarily include cultivation farms, processing sites, and dispensaries, but also management services operations and other financial arrangement within the pot industry. All told, it has well over five dozen retail licenses across the United States. 

But, as noted, the U.S. dispensary model is very cost-intensive, at least in the early going. Despite reporting a more than doubling in year-over-year gross profit through the first three quarters of fiscal 2018, the company still lost $4 million in the third quarter, and $2.1 million through the first nine months of fiscal 2018. It could be a while before the fundamentals backing the U.S dispensary model make sense to investors. 

A large sign outside of a cannabis dispensary that reads, in large white block lettering, Marijuana.

Image source: Getty Images.

Harvest Health & Recreation

Third and finally -- but perpetuating the trend -- is vertically integrated marijuana dispensary Harvest Health & Recreation (OTC:HRVSF), which is also expected to have its lock-up expiration on May 14. More specifically, some 227 million shares will become freely tradable in Canada, with roughly 83% of the company's outstanding share count becoming eligible to be sold.

Harvest Health & Recreation might be the toughest of all three to gauge, namely because of its share price and operating performance. Since it debuted, Harvest Health & Recreation's stock is up approximately 28%, which would presumably encourage insiders to lock in some of their gains.

Then again, this is a vertically integrated dispensary that's delivered recurring profitability at a quicker pace than either Acreage Holdings or Curaleaf Holdings. Through the first nine months of fiscal 2018, which includes its one-time reverse-takeover expenses, Harvest Health & Recreation recorded $7.6 million in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) and a net profit of $3.6 million. That profit, along with the company's more than 130 facility licenses across the country (dispensaries, cultivation, and processing), could buoy shares despite the lock-up expiration. 

Long story short, be ready for increasing volatility in the vertically integrated dispensary space in the months to come.