CannTrust Holdings shares rallied Wednesday to lead cannabis stocks higher, after the troubled company hired a financial adviser for a strategic review of its options, including a possible sale of the company.

CannTrust Holdings (TSX:TRST)(NYSE:CTST) stock has been plummeting ever since it was revealed that the company sold unlicensed cannabis and circumvented regulations for selling legal marijuana. The stock has shed over three-fourths of its value since March, and it doesn’t seem like the end is in sight just yet. 

Reports suggest that the company was cultivating and selling unlicensed cannabis from the date of legalization to early March 2019 at a Niagara greenhouse that only received appropriate licences in April. The discovery prompted Health Canada to suspend CannTrust’s licences, which means it can no longer sell the 5,200 kilos of dried cannabis it has already harvested. 

It has been quite a slippery slope for Canopy Growth (TSX:WEED)(NYSE:CGC) stock since late April. After hitting a record high that month, its shares have fallen more than 35% since then.

After a powerful rally during the early part of the year, the sell-off in marijuana sector has been drastic since April. Horizon Marijuana Life Sciences Index, for example, has fallen more than 25% since April 29.

So, what’s causing a sudden change in heart on the part of investors who have suddenly started to hate these market darlings? In my view, there are two main reasons behind the current sell-off.

The CBD-based health and wellness space is one of the world’s fastest-growing sectors. Recent reports indicate that global hemp-based CBD sales are projected to reach $22 billion by 2022, with a CAGR of 147%, showcasing the enormous growth the industry is set to experience in the next several years.

It’s been a brutal summer for weed stocks. After opening the year on a high note, the marijuana sector began tanking in May with no end in sight.

Although the month of May was a weak one for the markets overall, marijuana stocks were among the hardest hit–and they continued falling after other equities began to recover in June.

If you’re going to invest in weed stocks right now, it pays to tread carefully. Now that marijuana producers’ fates are beginning to diverge, it’s more important than ever to pick the right ones.

Legal marijuana has more or less been anointed as the next-big-thing investment on Wall Street. After worldwide sales came in at just under $11 billion in 2018, various Wall Street firms have called for anywhere from $50 billion to $200 billion in global annual sales in roughly a decade's time. Regardless of the estimate you prefer, the point is that the industry should be growing at a double-digit average annual rate for some time to come.

That makes marijuana stocks a hot commodity -- and none has been arguably gravitated to more than Edmonton-based Aurora Cannabis (NYSE:ACB).

Seven medical cannabis dispensaries in the US are filing suit against Facebook for unfairly placing their state-level legalized businesses in “Facebook jail,” according to Tulsa World.

Cannabis stocks continue to take a beating as a range of events undermine investor confidence in the industry. Key among these have been massive spending, a lack of profitability and growing regulatory issues. While this should concern investors, not all legal cannabis cultivators are struggling with profitability or cost blowouts. One that is poised to perform strongly in coming months is Khiron Life Sciences(TSXV:KHRN) which, despite following larger marijuana stocks lower since mid-March 2019, is still up by 27% for the year to date.

Even though cannabis stocks have languished badly of late, sales in the global marijuana industry are thriving. After registering $10.9 billion in global sales in 2018, according to Arcview Market Research and BDS Analytics, worldwide licensed pot-store sales should top $40 billion by 2024. That's a compound annual growth rate of better than 24%.

Hexo Corp. (HEXO.TO 4.02%) is refuting a short seller’s allegations that it could be the next Canadian pot company to become embroiled in scandal. Investors seem to be shrugging off the report too.

The Gatineau, Quebec-based cannabis producer was the biggest gainer Monday on Canada’s S&P/TSX Composite Index, adding 9.2 per cent, the most since April. The stock was little changed in pre-market trading Tuesday in New York even as most other pot stocks declined.