LAS VEGAS — The legal marijuana industry is going through an epic shakeout. "This is 2008 for the cannabis industry," said Kevin Murphy, chairman and CEO of Acreage Holdings. He also compares it to the dot-com bust. The question remains, which cannabis company will come out of the bust as marijuana's Google, and which will disappear like Pets.com? "It has been an exciting year, and not in the way that shareholders in this sector would like," said Cam Battley, chief corporate officer of Aurora Cannabis. Battley and others are in Las Vegas this week at MJBizCon, the largest marijuana business conference in the world. More than 1,300 exhibitors and 35,000 attendees are trying to figure out if 2020 will be better than 2019. "I think the launch in the state of Illinois is going to be a big market mover for the entire industry and that's coming in January," said Danny Moses of Moses Ventures. A catalyst is needed. The top six publicly traded marijuana companies have lost a combined $25 billion in market value since the end of March. There are a variety of reasons which boil down to one — everything is taking longer to roll out.

Oh Canada

The industry has been especially caught off guard in Canada, where the federal government has legalized cannabis across the country. "The anticipated roll out of bricks-and-mortar retail stores did not happen at the pace that everybody had anticipated," said Battley. As a result, Aurora has had to put the brakes on production expansion, "until the demand is there." He believes the backup in supply will start to ease in 2020 as more stores open. Battley said new developments in Canada next year should help, including edibles, vapes and infused beverages. "The clouds will start to part, the sun will start to shine through." He said Aurora still has the best gross margins in the industry, though Nelson Peltz has yet to find it a deep-pocketed partner, the way Canopy Growth struck a deal with Constellation Brands. "Nelson continues to remain deeply involved in our business, and we communicate with him and his team on a virtually daily basis."

Worst is over?

Al Foreman of Tuatara Capital has more than $300 million in two private equity funds hunting for good investments. To him, the industry's terrible stock performance reflects maturity in expectations. "This started back in 2018 with the parade of U.S. IPOs, all of which were pointing to forward-looking estimates based on valuations in 2020 and 2021," he said. "Our belief was you needed to start hitting your numbers in 2019, so 2019 is the year where financial results mattered." Then 2019 came, companies starting missing revenue targets, and the markets sold off. Foreman said top companies have started to meet their numbers again, and the market is "rightsizing."

But maybe not