Canadian cannabis stock prices fell this week as analysts reiterated doubts that a sweeping US legalization bill introduced on Thursday would pass the Senate.
Since the market opened on Thursday, the stock price of Canopy Growth Corp. WEED-T fell 18.07% and Aurora Cannabis Inc. ACB-T stock fell 15.81%. The TSX/S&P Composite Index rose 0.11% over the same period.
The drop follows several days of price growth earlier in the week in anticipation of the proposed legislation, known as the Cannabis Administration and Opportunity Act. If passed, it would remove cannabis from the US Controlled Substances Act and lay the groundwork for Canadian cannabis companies to make inroads into US markets. The bill seeks to decriminalize pot in the United States and allow states to set their own laws governing its distribution.
The Senate has already rejected a series of previous attempts to introduce a legal and financial framework for cannabis. While experts say this latest version of the bill – a revised version of a draft introduced last year – is unlikely to pass, they largely agree that, as with previous attempts to legalize cannabis, each attempt moves the needle.
In a note to investors, LP stock analyst Pablo Zuanic Cantor Fitzgerald said the company doubts the bill, proposed by Democratic Senate Majority Leader Chuck Schumer, will get the required 60 votes in the Senate. He joined a number of other analysts in casting doubts on the existence of adequate bipartisan support. Jaret Seiberg of US investment bank Cowen Inc. called the bill “dead on arrival”.
But Mr Zuanic wrote that the bill, even if defeated, could lead to narrower legislation later this year.
The proposed legislation is extensive. In addition to requiring the Department of Justice to declassify cannabis as an illegal drug, it would create a regulatory framework that would extend to the United States Food and Drug Administration; the Bureau of Alcohol, Tobacco, Firearms and Explosives; and the Alcohol and Tobacco Tax and Trade Bureau.
A particular sticking point for the bill is its call to overturn cannabis-related criminal convictions — historically a hard sell among Republicans.
It’s the first cannabis bill to bring all of these elements together, said Charlie Bowman, interim chairman and chief executive of Canadian cannabis producer Hexo Corp. HEXO-T, based in North Carolina. As a result, he said, he hopes the legislation will pass.
The bill’s sponsors, he said, appear to have learned a lesson from Canada’s experience with legalization, in which companies raised prodigious capital to grow rapidly and then had to downsize. to stay afloat. The bill outlines a plan for excise taxes – which are applied at the point of manufacture rather than retail – that would set the rate for large businesses at 25% of the value of the product. (In Canada, the duty is set at a fixed price of $1 per gram.) According to Bowman, this could have a dampening effect on business expansion.
Miguel Martin, general manager of Aurora Cannabis, said in an email that the bill’s introduction is a step in the right direction toward decriminalization and social justice reform.
“While it’s unlikely to pass the Senate, we’re optimistic it sets the tone for comprehensive legislation in the future,” he said.
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