Industry News

Several marijuana companies have taken a major hit

By Armina Ligaya |
Source: The Canadian Press

Traders using at least two major online discount brokerage platforms are complaining of sporadic outages and expressing frustration that the latest glitch has tied their hands amidst a broad plunge in marijuana stocks.

Clients of Toronto-Dominion Bank's WebBroker and Royal Bank of Canada's RBC Direct Investing platforms have again taken to social media to gripe about problems, after facing similar issues in recent days.

A TD spokesman says "unprecedented" trading volume continues to drive some intermittent delays for its online and mobile WebBroker clients, and the bank rolled out a broad update on Tuesday night to increase the platform's capacity.

"Our technical teams are working quickly to resolve this issue," said spokesman Paolo Pasquini. "We sincerely apologize for this inconvenience."

RBC spokesman AJ Goodman had a similar message, saying "heavy trading volumes" were to blame for service issues, and that a fix was in the works.

Brandon Colwell, an economics student and WebBroker user, says he has lost at least $8,000 as a result of the latest outage. The problems faced Thursday, as well as the outages on Dec. 29 and on Jan. 2, appear to be coinciding with surges in trading activity in the cannabis sector.

"This is the worst pullback I've seen in the cannabis sector in well over a year. ... It's incredible that these are corresponding," he said.

Several marijuana companies took a major hit Thursday — with shares of Canada's biggest licensed producer Canopy Growth down as much as 19% — after the Associated Press reported U.S. attorney general Jeff Sessions planned to rescind an Obama-era policy that allowed legalized pot to flourish in states south of the border.

Under U.S. federal law it remains illegal to cultivate, distribute, or possess the drug but the Obama administration had issued a guidance in 2013 known as the "Cole Memorandum" which suggested the federal government would not intervene in states where the drug is legal. More than two dozen states have legalized medical marijuana, and California is the latest state to legalize the recreational use of weed, as of Jan. 1. Later Thursday, Sessions released an official memo rescinding the Cole Memorandum.

Many Canadian marijuana companies saw double-digit plunges in their share price on the news, before regaining some ground by the afternoon.

And at least four cannabis-related firms listed on the Canadian Securities Exchange were temporarily halted today, according to the Investment Industry Regulatory Organization of Canada, due to the single-stock circuit breaker rule which limits sudden price swings of stocks.

Watching this brisk activity in the marijuana sector was particularly frustrating for bookkeeper and WebBroker user Pat Martin, who was unable to make any trades online.

"They were crashing so I was looking to sell, and then buy back in when it bottomed out. But obviously I couldn't do that at all ... It's just an endless issue," she said.

It's unclear whether the brisk activity in the marijuana sector is connected to the spike in trading volumes and brokerage problems, but the timing is unfortunate.

On Dec. 29, when these brokerage clients began experiencing glitches, IIROC temporarily halted trading on several Canadian-listed marijuana companies on the Toronto Stock Exchange due to the single-stock circuit breaker rule. The stocks briefly halted included Canopy, Aphria and Aurora Cannabis.

And on Jan. 2, when TD WebBroker users complained of problems, shares of Aurora, Canopy and Aphria saw brisk trading volumes as well.

Other online brokerages, including Bank of Montreal's Investorline and Canadian Imperial Bank of Commerce's (CIBC) Investor's Edge said Thursday they are not experiencing outages but some clients are experiencing phone wait times due to the volume of activity.

CIBC spokesman Jason Wesley says it is "experiencing record high trading volumes" but clients can continue to trade on its online platform.

BMO spokesman Ralph Marranca says that other than a brief website outage on Dec. 27, when clients could still trade via its call centre, its brokerage remains functional.

"Like those across the industry, we are experiencing higher-than-normal volumes," he said. "We apologize for the increased wait time that clients are experiencing. We have added call centre staff to increase capacity for our customers and customers can also continue to access their accounts through our website as well as their mobile app or tablet."