At this time last year, cannabis stocks were one of the hottest investments on Wall Street. That's because Canada, just a month earlier in Oct. 2018, had become the first industrialized country in the modern era to legalize recreational marijuana. Our northern neighbor also looked to be on track to give the OK to derivative pot products by no later than October of the following year (2019).

We were also witnessing a number of new states in the U.S. give the green light to marijuana, paving the way for what looked to be the rapid ascent of North American cannabis sales. And then those expectations got violently shoved out the window.

A person using a pin to pop a bubble with a dollar sign inside of it.

Image source: Getty Images.

The cannabis bubble has burst

Since legal weed sales commenced in Canada, persistent supply issues have kept product from reaching dispensary store shelves. Part of this blame falls on Health Canada, the regulatory agency responsible for overseeing the license application process for the pot industry. Health Canada has been so overwhelmed with applications that it's taking many months -- if not longer than a year in some instances -- for growers to begin planting, processing, or selling their cannabis.

Select Canadian provinces are also to blame for this mess. Canada's most populous province Ontario, which is home to around 14.5 million people, only has roughly two dozen dispensaries open for business. That's far too few physical retail points for the legal industry to have success when competing against an engrained black market.

Meanwhile, in the United States, high tax rates have significantly hindered certain states. California's marijuana consumers are being forced to absorb state and local taxes, a 15% excise tax, and a wholesale tax on either dried cannabis flower or leaves. Plus, there are added expenses built into the price of legal pot, such as laboratory testing, which are assuredly being passed along to the consumer. This makes it veritably impossible for legal pot to be price-competitive with illicitly grown weed.

Add up these early stage speed bumps, and it's pretty easy to understand why marijuana stocks have been clobbered since the end of the first quarter.

Unfortunately, pot stocks may have a new worry on the horizon: the possibility of being delisted from a major U.S. exchange.

The facade of the New York Stock Exchange draped in a huge American flag, with the Wall St. street sign in the foreground.

Image source: Getty Images.

A number of pot stocks are suddenly in danger of being delisted

Over the past three years, more than a dozen marijuana stocks have been successful in listing their shares on either the New York Stock Exchange (NYSE) or Nasdaq exchange. Although a few have gone the initial public offering route -- e.g., Innovative Industrial Properties, Tilray, and Sundial Growers -- most have chosen to uplist their common stock directly from the over-the-counter (OTC) exchange.

Moving from the OTC exchange to the NYSE or Nasdaq usually means improved investor visibility, heightened Wall Street coverage, and a better chance of increased Wall Street investment. It's an especially privileged honor for those marijuana stocks that have made the move, given that U.S.-focused cannabis stocks are unable to do so. Since cannabis remains a Schedule I substance in the United States, only cannabis stocks that don't deal with the plant in the U.S. are eligible for listing on a major stock exchange.

But this privilege can just as easily be taken away. You see, the NYSE and Nasdaq have a rigorous set of standards that its listed companies must adhere to, including a minimum share price of $1 per share. Quite a few marijuana stocks are suddenly nearing, or even below, this all-important threshold. If NYSE-listed or Nasdaq-listed stocks stay below $1 for a period of 30 consecutive days, they could be subject to delisting (i.e., a return to the OTC exchange).

A person holding a magnifying glass over a potted cannabis plant.

Image source: Getty Images.

These marijuana stocks are at the greatest risk of being delisted

Which marijuana stocks are in trouble, you ask? I'd consider all four of these companies to be too close for comfort to the $1 threshold (as of the Nov. 19 close):

Each of these four cannabis stocks has somewhat recently disappointed Wall Street. For example, both HEXO and Aurora Cannabis reported quarterly operating results that widely missed the mark. HEXO had originally been calling for a doubling in sequential quarterly sales, only to provide a preliminary fourth-quarter update that its actual sales growth would be more like 19% at the midpoint. When HEXO finally delivered its results, it also announced that it'd be idling its Niagara growing campus, which was inherited via the Newstrike Brands acquisition, and would shed 200 jobs.

It was a similar story for Aurora Cannabis, which immediately decided to halt construction of Aurora Nordic 2 in Denmark and Aurora Sun in Alberta. Combined, these are facilities that were forecast to yield at least 350,000 kilos per year. But in the meantime, a mere six grow rooms totaling 238,000 square feet out of 1.62 million square feet of peak capacity at Aurora Sun will be used for production. Making matters worse, Aurora Cannabis needs cash and continues to issue its own stock to raise capital, further diluting existing shareholders and weighing on its already depressed share price.

Scissors cutting a one hundred dollar bill in half.

Image source: Getty Images.

Even OrganiGram, which has kept a clean profile as scandals have rocked the pot industry, succumbed to a weaker forecast. A recent update by OrganiGram is calling for a 34% decline in sales in the fiscal fourth quarter from the sequential third quarter, with the company blaming Ontario's lack of physical dispensaries and weaker-than-expected high-margin cannabis oil sales, for its significant sales shortfall.

But the disaster du jour is undoubtedly CannTrust. This is a company that, in July, announced it had grown cannabis illegally in five grow rooms at its flagship Niagara facility for a period of six months. Subsequent to this announcement, now-former CEO Peter Aceto was fired and CannTrust had its cultivation and sales licenses suspended by Health Canada. Now, it's trading below $1. After not reporting its financial results, a requirement for ongoing listing, CannTrust looks like it'll be the first pot stock to be given the boot back to the OTC exchange.

The only real question at this point is whether or not CannTrust will be the last marijuana stock delisted from a major U.S. exchange.