Marijuana stock investors are wagering that Jeff Sessions’ bark will be bigger than his bite.
U.S. and Canadian cannabis stocks briefly tumbled after the U.S. attorney general’s blockbuster decision last week to rescind Obama-era protections for the legal cannabis industry.
But by Friday’s close, the day after Sessions dropped his bombshell, U.S. marijuana stocks had recouped about half their losses. And Canadian share prices actually closed at record highs.
The rebound suggests investors believe the status quo will largely be maintained for U.S. marijuana businesses.
Sessions’ decision allows prosecutors in the 30 states and the District of Columbia with legal marijuana laws to decide how aggressively to enforce longstanding federal law prohibiting the sale and cultivation of the plant.
Here’s what you need to know about the situation:
- By Thursday’s close of trading, the U.S. Marijuana Index and the Canadian Marijuana Index had fallen by 22% and 6%, respectively, from Wednesday’s close. By Friday, both indices had recuperated some – if not all – of their losses, with the U.S. Marijuana Index up 12% and the Canadian Marijuana Index up 7% from Thursday’s close.
- While no one can be sure how Sessions’ move will ultimately affect marijuana businesses, many industry experts downplay the likelihood of a widespread industry crackdown – suggesting instead that federal officials will prioritize enforcement action against individual businesses that flaunt state laws or engage in interstate trafficking.
- Both the Canadian and U.S. indices rose sharply in the first days of trading in 2018, likely propelled by the launch of recreational marijuana sales in California – the largest marijuana market in the world. Several marijuana companies based in Canada have exposure in the U.S., explaining the parallel rise and fall between the two indices.
- In general, 2017 was a banner year for publicly traded marijuana companies in Canada. Driven by the country’s plans to legalize recreational marijuana this year, the Canadian Marijuana Index rose 153% over the course of 2017. By comparison, the U.S. Marijuana Index rose a relatively modest 19%.
- Canadian marijuana businesses may benefit from the uncertainty created by Sessions’ decision to tear up Obama-era protections, given that more capital could flow into that country’s fully-legalized and regulated industry.
Eli McVey can be reached at [email protected]