Investors' collective high over Canada's burgeoning marijuana industry has evaporated, to be replaced by a comedown.

Marijuana stocks tumbled Friday amid a wave of "panic-selling" and concern that companies that had seen ballooning share prices recently are now overvalued. The BI Canada Cannabis Index plunged as much as 19 per cent, its biggest intraday drop on record, while the nation's largest producers including Canopy Growth Corp. and Aurora Cannabis Inc. tumbled more than 40 per cent from their January highs.

"There's a lot of investors that got in in the last month and many of them are looking at significant losses," PI Financial analyst Jason Zandberg said by telephone. "It now looks like it's a pile-on. There's a bit of panic selling."

Story continues below advertisement

Read more: Why Canada's pot stock boom just doesn't add up

Marijuana millionaires: The Canadian execs getting rich off the rally

Shares of Canopy tumbled as much as 16 percent in Toronto to the lowest intraday price in six weeks, while Aurora dropped 17 per cent and Aphria Inc. fell 14 per cent.

The plunge comes after some market leaders more than doubled in value since November amid optimism that Canada will legalize pot this year. A wave of consolidation followed, as companies jockey for market share and enough supply to fill provincial retail shelves. Last month, Aurora Cannabis agreed to acquire CanniMed Therapeutics Inc. in a $1.23-billion deal that's the largest merger ever in the red-hot industry.

Boosted Production

On Friday, the government's statistics agency released new data that shows Canadian marijuana costs $6.85 a gram. Earlier estimates suggest weed prices have been falling in recent years as illegal producers boosted output in recent years, potentially cutting into the revenue for publicly traded companies that hope to tap into the new market.

Concern that companies are overvalued has helped spark the decline, Zandberg said. While some of the periphery cannabis stocks will probably not survive in the long term, there is enough demand in Canada to transfer over to a legalized market and the industry leaders will thrive, he said.

Story continues below advertisement

"People are panicking because they are losing their money," Chris Damas, editor of the BCMI Cannabis Report, said in an email. "Stocks are in bear market territory."

Friday morning's selling is probably the peak and stocks will likely stabilize from here, Damas said in a note. Still, the Canadian cannabis shares have been overbought and have probably seen their highs for the year, he said.