Canadian marijuana stocks have been on a punishing slide for three straight months despite a temporary blip of investor fever in April that sent share prices soaring to record highs as Ottawa tabled legislation to legalize pot.

An index of 12 top-performing cannabis stocks shows that share price gains in January and February have largely been erased by declines in recent months.

Alberta’s Aurora Cannabis has seen its share price fall by more than a third since reaching an all-time high of $3.29 each on April 10, when the entire industry reached a peak three days before the Liberal government announced its legalization bill.

The stock closed at $2.11 Monday, 11 per cent lower than the first day of trading in January. 

Khurram Malik, analyst at Jacob Capital Management Inc., said the industry’s outlook won’t get much better until Ottawa and the provinces clarify the rules for a recreational market.

Malik said the industry is still in the dark about critical questions, including potencies of the drug that will be permitted for sale, packaging rules, and identifying the retailers that will be responsible for selling it.

The cannabis industry is highly regulated and is still in its infancy, which means government decisions remain the biggest driver moving the market, Malik said.

“The longer it takes for the feds and provincial governments to provide more explicit guidance, (stocks) are going to keep moving down,” he said.

Following a public engagement period, which is currently underway, the Alberta government plans to release a draft framework for legalizing pot in the fall. Retail sales are expected across the country as early as July 2018, though some provinces may not be ready.

Amid swirling questions over whether marijuana stocks are in bubble territory, share prices have been on a wild ride of peaks and valleys driven by wider events, such as elections and government announcements, rather than company performances.

All 12 Canadian stocks tracked on the Los Angeles-based Marijuana Index lost ground in May, nine of them suffering double-digit declines.

It was the third consecutive month of losses for the Canadian index. Even though investor excitement surrounding Ottawa’s legalization announcement sent stocks soaring, the blip was only temporary as a following sell-off wiped away the gains.

Trading activity has also taken a nosedive. Aurora’s stock, for instance, saw an average of US$2.9 million worth of trading each day last month, down from US$11.5 million in April, a 75 per cent plunge.

“(Trading) volume drove the price spikes at the end of March, early April, and since then it has really dropped off,” said Dan Nicholls, vice-president of the Marijuana Index which tracks top-performing stocks in North America.

Dramatic spikes in share prices have attracted scores of first-time investors who have put up their own money to ride what they hope will be a big green wave to riches.

Matt Henry, a telecommunications technician in Calgary, said he’s invested $18,000 of his own cash in a single company, Ontario-based Supreme Pharmaceuticals. Given recent declines in the stock market, his investment was down 10 per cent Monday, but he’s not too worried.

“I’m a pretty patient guy who doesn’t get stressed too easily so I can handle it,” said Henry, who plans to ride the cannabis market for at least another year or two. 

Henry said he expected share prices would fall, because “everything was way too high; it could only come down, but I’m a little surprised it’s still going down.”

Nicholls said several factors have likely weighed on share prices. While he agreed the industry is looking for more clarity on legalization rules, he added investors have followed a familiar pattern of buying on rumours and selling on news, after Ottawa tabled legislation in April.

Nicholls said he wouldn’t be surprised if investor fatigue was also helping to drive down share prices as more licensed growers enter the market looking to cash in on what is widely believed to be a multibillion-dollar industry.

“We’ve seen four or five new (licensed growers) go public in the last month,” he said.

“For some investors, this is a brand new market; some of these companies aren’t producing revenue, so it can be difficult for investors to differentiate between the different (growers) as more and more are coming online.”