Weed stocks are under pressure on the eve of Canada's legalization

REUTERS/Patrick Doyle

A Canadian flag with a marijuana leaf is flown during a 4/20 rally to demand the legalization of marijuana on Parliament Hill in Ottawa April 20, 2012.

• Cannabis stocks were frothy Tuesday - one day ahead of Canada's full legalization.
• After previously setting record highs, Canopy Growth and Aurora Cannabis had fallen into the red alongside the entire sector.

Canada will become the first developed country to legalize recreational cannabis on Wednesday, but with mere hours left before the first sales are legal, many of the largest marijuana stocks were seeing red.

Canopy Growth, Aurora Cannabis, and Tilray - collectively the three largest producers by market cap - had all fallen into the red by midday Tuesday, hours after Canopy and Aurora soared to record highs.

Here's the scoreboard:

• Canopy Growth: -7.19%
• Tilray: -5.73%
• Aurora Cannabis: -6.7%

The recreational market for cannabis in Canada could reach $10.5 billion CAD by 2023, analysts at Benchmark estimated Tuesday, with Tilray already leading the pack.

"We expect Tilray to acquire a meaningful share of the Canadian cannabis market based on initial supply agreements and through its first mover advantage in building production scale and strengthening national brands and products across a broad and expanding category," the analyst Mike Hickey, said in a note to clients. He has a $200 price target for the stock - a 28% premium to Tuesday's prices.

Horizons' Marijuana Life Sciences ETF, a fund that aims to track the performance of the entire sector through stakes in some of the largest players, was down about 4% Tuesday. MJ, a US-traded ETF with many of the same holdings, was down 2.5%.

More coverage of the booming Cannabis sector:

• The 'world's biggest legal-pot dealer' talks about taking his company public and the future of weed
• 'DEAR MR. PRESIDENT': One marijuana company has a bold strategy to save American cannabis producers from getting left in Canada's wake
• A $22 billion investment firm led one of the largest ever funding rounds for a cannabis tech company - here's why it's a big deal for the industry

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