Cannabis Company Stocks Surge Ahead of Legalization in the US and Mexico
This week, several companies involved in cannabis production and the investment funds backing them saw a significant rise in their stock prices. For example, GW Pharmaceuticals shares jumped by an average of 45% on Wednesday, Aphria shares rose by 30%, and Canopy Growth increased by 12.5% (up 35% over two weeks).
The Canadian investment company Nabis Holdings, which invests in cannabis and was on the verge of bankruptcy, set a record: its stock price soared by 9,500% in just a few days. The Canadian regulator was forced to halt trading and even imposed a ban on short selling.
It appears that this surge was not driven by a massive wave of traders from the Reddit platform. Instead, the cannabis market is clearly being fueled by the growing possibility of marijuana legalization in the United States (and also in Mexico).
Progress Toward Legalization
At the end of last year (December 4), the US House of Representatives passed a bill to decriminalize marijuana at the federal level by a majority vote. However, for the bill to become law, it must also be approved by the Senate and signed by the President.
The bill would remove marijuana from the list of prohibited substances, allow businesses in the sector to operate legally, permit doctors to prescribe marijuana for medical use, and overturn previous convictions for possession or use of marijuana, provided the charges were not related to violence.
While Mitch McConnell led the Senate majority, the upper chamber was a reliable barrier to any discussion of federal cannabis policy reform, despite broad public support and repeated successes in state-level legalization, according to Forbes.
After just a few weeks in control of the Senate, top Democrats promised last Monday to use their newfound power to legalize marijuana-and to do so soon. In a joint statement, new Senate Majority Leader Chuck Schumer (New York), Senator Cory Booker (New Jersey), and Ron Wyden (Washington) announced that during the current session, they would prioritize and advance a “comprehensive cannabis reform bill.”
State-Level Developments
Virginia is currently discussing the possibility of legalization without waiting for federal law, following the lead of Arizona, New Jersey, South Dakota, Mississippi, and Montana, which all legalized marijuana in some form by the end of last year. In total, cannabis is now legal in 15 states, and medical use is permitted in 34 states.
Market Outlook
According to BDS Analytics and Arcview Market Research, the US market for marijuana-based products is expected to exceed $20 billion by 2024. In the UK, the market could reach nearly οΏ½1 billion per year by 2025, according to the UK Center for Medical Cannabis.