I'm not sure what's more frightening... the ghouls, goblins, and ghosts you might come across at some point today, or the aggregate return of the cannabis stocks since the end of March. My money might be on the latter, because at least the former winds up with tasty treats by the end of the evening.

What had been a can't-lose story for marijuana stocks has quickly turned into a nightmare, with most cannabis stocks losing at least half of their value in recent months. Persistent supply issues to our north, high tax rates in select U.S. states, and a resilient black market throughout North America have put a serious dent in the once-lofty sales projections for the pot industry.

While this pullback has yielded some semblance of value, it may also be providing false hope for a number of popular pot stocks. In the spirit of Halloween, consider the following three cannabis stocks more trick than treat at their reduced valuations.

Aurora Cannabis

Aurora Cannabis (NYSE:ACB) is the most popular pot stock on planet, at least according to millennial investors with the Robinhood app. It's the projected leading producer in Canada, with perhaps up to 700,000 kilos of annual output, has a broader global presence than any other marijuana company, and has billionaire activist investor Nelson Peltz in its corner as a strategic advisor. With its share price down about 65% from its year-to-date high, Aurora would certainly appear to be a treat. But looks can be deceiving.

In Canada, the company is being held back by regulatory and procedural issues. Health Canada has been slow to approve cultivation and sales licenses, while select provinces have slow-stepped the rollout of physical dispensaries. With only one open dispensary for every 602,400 adults in Ontario, it's practically rolled out the red carpet for illicit producers to thrive. And, it's worth noting that these supply problems are highly likely to continue as marijuana derivatives begin hitting dispensary shelves in mid-December.

Aurora's international strategy is also a bit tricky. Sure, it has representation in 24 countries outside of Canada, which would appear to imply that it has plenty of external sales channels to ship excess supply. But therein lies the issue: There is no excess supply in Canada, and there may not be for quite some time. This makes Aurora's international markets more of a moot point for a couple of years.

Lastly, Aurora's balance sheet is scary. The company has a $230 million Canadian convertible note due in March that's nowhere near the share conversion price, likely meaning it'll have to pay cash to settle the debt. It also has CA$3.17 billion in accrued goodwill following more than a dozen acquisitions over the past three years. This goodwill accounts for 58% of the company's total assets, making it likely that at least some portion of this value will be written down in the not-so-distant future.

MedMen Enterprises

Another popular cannabis stock that likely looks like a treat on the surface is vertically integrated multistate operator MedMen Enterprises (OTC:MMNFF). MedMen, which aims to normalize the cannabis-buying experience, has 30 open locations in the U.S., and is focused on two of the three most lucrative markets in the country: California and Florida. Having declined by 80% from its highs, MedMen's stock might look like a bargain. But again, it's a trick. 

Much in the same way that Aurora has been hamstrung by supply issues to the north, MedMen has been hammered by high tax rates in California. Last year, California should have seen adult-use weed sales soar, given that recreational sales kicked off on Jan. 1, 2018. In reality, legal weed sales declined by $500 million to $2.5 billion in 2018 because of the Golden State's high tax rate on marijuana. Perhaps, then, it's no surprise that MedMen's core market, California, has generated just 5% sequential quarter sales growth in the fiscal third quarter, and 10% sequential quarterly revenue growth in the fourth quarter.

This is also a company that's losing a lot of money on an operating basis. At a time when operating earnings have come into focus, and a handful of multistate operators have pushed into the green, MedMen produced a nine-month operating loss of $178.4 million in fiscal 2019. MedMen's efforts to build its brand and expand into new markets are proving costlier than anyone could have imagined.

There are also serious funding concerns, too. With marijuana holding firm as a Schedule I drug, access to financing in the U.S., short of selling stock, is highly limited. Even with $280 million pledged from private equity company Gotham Green Partners, and MedMen breaking off its acquisition of PharmaCann to reduce its capital outlays, there's no guarantee that the company has sufficient funding to execute on its strategy.

Canopy Growth

The largest marijuana stock in the world by market cap, Canopy Growth (NYSE:CGC), might also turn heads. Having lost close to $10 billion in value since its peak earlier this year, Canopy's top-tier production, access to 17 markets (including Canada), and breadth of branding and product assortment, likely has it high on investors' lists. But this sweet looking value is, like its peers, a trick.

Similar to MedMen, Canopy Growth is losing a lot of money. In the fiscal first quarter, Canopy reported a CA$216 million operating loss, not counting the one-time massive charge it took to extinguish warrants, or its one-time gain from the fair-value adjustment on biological assets. A good chunk of the company's ballooning expenses are derived from share-based compensation. While keeping employees loyal, these added costs could make it impossible for Canopy Growth to turn a profit before 2022. 

Canopy's aggressive acquisition strategy also puts its balance sheet into a bind. Though the company has plenty of cash on hand, it's lugging around CA$1.93 billion in goodwill. Like Aurora, this goodwill is unlikely to be recouped in full and may eventually lead to a costly writedown. Goodwill currently accounts for 22% of Canopy's total assets, but this figure could climb as losses continue and its cash pile dwindles over time.

Finally, Canopy Growth doesn't have a permanent CEO, as of yet. In July, its board showed longtime visionary co-CEO Bruce Linton the door, and announced that now-current CEO Mark Zekulin, who ran the ship next to Linton, will also step down once a replacement CEO is found. This leaves the largest marijuana company in the world without any concrete direction or game plan.

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