Shares of marijuana companies rose Thursday after the US Congressional Committee passed legislation to decriminalize cannabis. This brings it closer to approval by the Democratic-controlled House of Representatives.
The bill passed in the House Judiciary Committee at the end of October sent shares of Canopy Growth (WEED.TO), Aurora Cannabis (ACB.TO), Aphria Inc (APHA.TO) and Tilray Inc (TLRY.O) to gains between the between 8% and 15%.
“We think federal legalization will have a major positive effect on investor sentiment around cannabis stocks, which have been battered by oversupply and a steep decline in cannabis prices since it became legal in Canada,” said Garrett Nelson, senior equity analyst at CFRA Research.
New law
The approval comes two months after the House passed a bill to promote legislation that would allow banks to provide services to cannabis companies in states where weed is legal. This new law allows US states to determine their own policies while at the same time banning federal marijuana convictions and arrests.
In addition, the law will allow a 5% federal sales tax on marijuana products manufactured or imported into the United States. However, analysts are skeptical about the future of the law. “It's such an early step in a long process that there are no short-term implications for cannabis stocks. The Senate probably won't approve it, even if the House did, ”said Alan Brochstein, managing partner at New Cannabis Ventures.
Shares in the sector have fallen by more than 25% this year. This is probably due to the slow rollout of cannabis stores, oversupply in Canada and uncertainties regarding US laws and regulations. Weed companies have spent a lot of money to expand and form partnerships in the United States. In addition, they trust that more and more states are legalizing cannabis for both recreational and medical use. Currently, 11 US states have legalized marijuana for recreational use, while 33 states have approved it for medical purposes.
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