雅虎香港財經 3 Nasdaq Stocks Facing Regulatory Hot Water in 2023
Among the groups of Nasdaq stocks in trouble this year are crypto names and marijuana stocks. When it comes to cryptos, Washington is clearly attacking the sector. Meanwhile, marijuana stocks are likely to sink much further as it becomes crystal clear to even those who are most bullish on the space that Congress isn’t coming to its rescue anytime soon.
Further, other factors are weighing on both sectors. For example, many, if not most, investors have clearly lost faith in cryptos, despite their recent rebound. And cannabis companies’ consistently awful financial results appear to have finally convinced most investors that the sector is a dead end.
In light of those points, here are three Nasdaq stocks in trouble in 2023. Two are from the crypto sector, and one sells marijuana.
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Nasdaq Stocks in Trouble: MicroStrategy (MSTR)
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Regulators look poised to further lower most consumers’ poor opinion of cryptos, and that’s negative for MicroStrategy (NASDAQ:MSTR). That’s because MSTR, as of the end of last year, had a huge stash of 132,500 tokens of Bitcoin (BTC-USD).
The Federal Deposit Insurance Corporation could soon take one move by regulators that could undermine confidence in crypto. The FDIC sold a portion of the assets of Signature Bank, which failed earlier this month. In conjunction with the deal, FDIC stated that the buyer, New York Community Bancorp (NYSE:NYCB), did not purchase “approximately $4 billion of deposits related to the former Signature Bank’s digital-assets banking business.”
The agency cryptically (no pun intended) added that it would “provide these deposits directly to customers whose accounts are associated with the digital-asset banking businesses.”
But the fact that the FDIC did not use the word “crypto” or “insured” and utilized such generally strange, indirect language makes me think that the agency could refuse to hand over some or all of the crypto deposited with Signature.
Also feeding my suspicions are the agency’s general, previous hostility to crypto and its rather clear statement last July that “Deposit insurance does not apply to non-deposit products, such as…crypto assets.”
If the FDIC decides not to refund depositors’ crypto, anxiety about the safety of crypto is likely to surge again. After all, the FTX saga showed that the value of cryptos kept on exchanges could be wiped out. If cryptos held in banks can be wiped out and those kept on personal devices can be stolen by hackers, where exactly can they be safely kept?
If the value of Bitcoin plummets amid fears about the safety of Bitcoin, Microstrategy’s shares will plunge.
Coinbase (COIN)
Source: Primakov / Shutterstock.com
Coinbase (NASDAQ:COIN) would also be hurt if the value of cryptos plunge following a potential decision by the FDIC to refuse to insure crypto deposits at Signature Bank, as I discussed in the previous section.
Coinbase, however, is facing many other regulatory headaches. First, the exchange refuses to comply with the Securities and Exchange Commission’s demand that it fills out the necessary paperwork to become a securities exchange. This likely led to the agency being hit with a potentially disastrous (for Coinbase) Wells notice by the SEC on March 22.
According to The Wall Street Journal, “Staking products allow investors to earn a return by lending their tokens.” The SEC prevented another crypto exchange, Kraken, from carrying out the practice. According to The Journal, “Coinbase’s net revenue from blockchain rewards—which includes staking revenue” generated 10% of its total sales last quarter.
Additionally, COIN will find it hard to find banks with which to partner and from which to borrow funds going forward. That’s because, as I pointed out in a previous column, the Federal Reserve, along with the FDIC and the Comptroller of the Currency, have adamantly tried to prevent banks from funding ‘crypto-asset-related entities.
Aurora Cannabis (ACB)
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A few years ago, I predicted that the cannabis sector would not boom because, for the most part, it’s not socially acceptable and because illegal dealers would be able to sell the drug more cheaply than legal retailers. That scenario has indeed played out, as few if any marijuana companies are profitable, and most have become penny stocks.
Aurora Cannabis (NASDAQ:ACB), for example, was, a few years ago, touted as a “can’t miss” stock by many cannabis bulls. In the 12 months that ended in June, however, its operating income came in at -$171.3 million, and ACB stock closed yesterday at 66.6 cents. Meanwhile, the shares have a relatively tiny market capitalization of $226.5 million.
The few investors who are still bullish on cannabis stocks believe that Congress will legalize the drug, giving cannabis companies unfettered access to American banks for the first time and causing many more Americans to start using the drug.
However, Republicans have a majority in the House of Representatives, and many members of that conservative party still do not support legalizing cannabis. Moreover, in most scenarios, any legalization bill would have to garner the support of 11 GOP senators. Therefore, this Congress will not legalize the drug, so cannabis will not be legalized nationwide until at least 2025.
As of the date of publication, Larry Ramer was short COIN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.
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