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Why Shares of Charlotte's Web Holdings Sank on Tuesday

By Eric Volkman – Sep 1, 2020 at 7:12PM

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The departure of a board member seems to have rattled investors.

What happened

Charlotte's Web Holdings (CWBHF 4.38%) slumped by 3.4% on Tuesday. The cannabidiol (CBD) products specialist reported earlier in the day that one of its board members, Shane Hoyne, has resigned. The move was effective that day; he added that he will not stand for reelection at the company's annual general meeting slated to take place on Thursday.

Charlotte's Web did not provide a reason or reasons for his departure.

Dropper of cannabis derivative liquid in front of several plants.

Image source: Getty Images.

So what

Hoyne doesn't seem to have been a pivotal figure as a director. It's likely that investors are more worried about the lack of confidence his move might indicate about the company's prospects. Or, for that matter, the CBD market specifically, or even the wider marijuana industry in general.

While board departures haven't been exactly regular in corporate cannabis, there have been more than a few of them over the past year or so. Onetime Cresco Labs president Joe Caltabiano resigned from that company's board in June, while in the same month Canopy Growth co-founder and ex-CEO Bruce Linton relinquished his board seat at Vireo Health International.

Now what

Cannabis industry investors are generally skittish these days, as profitability remains elusive and full legalization is developing sluggishly, at best. Yet CBD companies are in a better position, as the substance has been legalized in the U.S. and as a business does not face many of the challenges currently in front of marijuana producers and sellers. Considering that, this share price dip feels like somewhat of an over-reaction.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Cresco Labs Inc. The Motley Fool recommends Charlotte's Web. The Motley Fool has a disclosure policy.

Stocks Mentioned

Charlotte's Web Stock Quote
Charlotte's Web
$0.66 (4.38%) $0.03
Canopy Growth Stock Quote
Canopy Growth
$4.29 (9.16%) $0.36
Cresco Labs Stock Quote
Cresco Labs
$3.80 (7.04%) $0.25
Goodness Growth Holdings, Inc. Stock Quote
Goodness Growth Holdings, Inc.
$0.36 (-0.56%) $0.00

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