A worker inspects cannabis plants inside the growing room at the Aphria Inc. Diamond factory in Leamington, Ontario, Canada, on Wednesday, January 13, 2021. Tilray Inc. and Aphria Inc. have agreed to combine their operations , forming a new giant in the rapidly growing cannabis industry.
Annie Sakkab | Bloomberg | Getty Images
For stocks with names like Curaleaf Holdings, GrowGeneration and Aurora Cannabis, the buzz seems to be going.
As part of the liquidation of the market that has hammered technology and other areas of growth in recent weeks, investors have also divested themselves of cannabis producers and distributors, who had performed extremely well during the pandemic months.
The AdvisorShares Pure Cannabis ETF, which consists of producers and developers of cannabinoid-based drugs, fell 8.5% after a 9.4% decline last week. The Amplify Seymour Cannabis ETF has dropped 20% in the past two weeks, the biggest drop since March last year.
Most major cannabis companies are based in Canada, where the plant has been legal for recreational ingestion since 2018. The US has almost 10 times as many people as Canada, and distributors are eagerly awaiting the opportunity to expand south.
For a while, things looked good.
Weed’s stock soared after Joe Biden was elected president in November, and again in January, after Democrats secured a majority in the Senate with two victories in Georgia’s runoff. Investors applauded the results, believing that Democrats would take steps to legalize cannabis at the federal level after the November ballots to allow recreational marijuana in Arizona, Montana, New Jersey and South Dakota. They joined 11 other states that they had already legalized marijuana.
Senate Democrats have promised comprehensive legislation that would end the federal marijuana ban and end the war on drugs.
“Ending the federal marijuana ban is necessary to fix the mistakes of this failed war and end decades of damage inflicted on communities of color across the country,” wrote Senate Majority Leader Chuck Schumer of New York along with with Sens. Cory Booker from New Jersey and Ron Wyden, from Oregon, in a statement on February 1.
Where are the Republicans?
But working in the corridor will not be easy, and Democrats need some Republican colleagues to pass any meaningful legislation. If Covid-19’s relief bill is any indication, the prospects for bipartisanship are bleak. Not a single Senate Republican has signed the $ 1.9 trillion package.
Matt Bottomley, an analyst who covers the cannabis industry at Canaccord Genuity, highlighted the political challenges in a report last month about Canopy Growth, which has marijuana retailers and brands that produce cannabis-based products. He lowered his rating for sale after the company’s quarterly results, mainly because of “significant appreciation” since October.
“The industry continues to see value appreciation as a function of the positive macro headlines coming out of the U.S. (Biden presidency; democratic control of the Senate; commitment to push cannabis reform in the U.S. at the federal level),” wrote Bottomley. “We do not anticipate federal legalization of cannabis in the United States anytime soon and we believe that the appreciation of the value of CGC in recent times has probably not found a corresponding fundamental advantage at this time.”
Canopy growth has dropped 19% in the past two weeks.
Among the biggest losses this week was Aphria, which agreed in December to merge with Tilray into what will be the largest cannabis company by revenue. Aphria, which produces medical and recreational cannabis, plummeted 13% after dropping 11% last week. It is the worst two-week performance for the stock since a four-week drop between February and March last year.
Aphria CEO Irwin Simon told CNBC last month that he expects marijuana to be legalized in the U.S. in the coming years, but said it could happen earlier in places like Germany and Portugal.
“There is a lot of uncertainty about what will happen in the United States, but we will have the balance, we will have the knowledge, we will have the brands, we will have the technology to be able to make a big impact as soon as legalization happens,” said Simon on February 24 in ” Closing Bell “.” I say full legalization in the next two to three years. “
Shares in Tilray, a research, cultivation and distribution company, fell 12% this week after last week’s 17% decline.
The drop hit the entire industry.
Curaleaf, a provider of health and wellness products, fell 12% in two weeks, while GrowGeneration, an online growing supply store, plummeted 31% and cannabinoid supplier Aurora Cannabis fell more than 20%.
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