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- Two hearings on hemp production and banking transactions by cannabis companies fueled volatility in cannabis inventories last week.
- The hearings show progress but also confusion about how cannabis should be regulated in the United States.
- Activists and industry watchers say that legalization is imminent, but the process for doing so is not clear. Nevertheless, the market for cannabis and cannabis products is growing and investors are seeing promising returns on the horizon.
- Learn more about Markets Insider.
Marijuana stocks have been subject to recent volatility, and a number of key audiences have shown that while advances in cannabis regulation are encouraged, lawmakers do not know how to proceed at best.
The shares of Tilray, Cronos and Curaleaf slipped about 2% last Thursday after a hearing before the Senate Standing Committee on Agriculture, Nutrition and Forests titled "Hemp Production and the 2018 Farm Bill". Dawn and canopy growth was almost flat after the hearing.
In the United States and abroad, the cannabis industry is growing much faster than regulation has been introduced, said Bethany Gomez, managing director of Brightfield Group, a company of 39 market research and predictive badysis.
"Everyone is calling for regulations," said Gomez. "There is still a lot of confusion and a lot of legal gray areas around these products."
Although hemp and its derivatives have been legalized by the 2018 Farm Bill, the Food and Drug Administration has still not issued clear guidelines on the marketing and sale of CBD products. In addition, banks and financial institutions are currently prohibited from working with cannabis companies, even though Secure Et Fair Enforcement (SURE) The banking law, which would reverse the trend, enjoys bipartite support.
The stakes are high for the US government and for companies that produce and sell cannabis products. It was felt that the only sector of the CBD could become a market $ 16 billion in industry by 2025 On a global scale, the legal marijuana market could reach $ 66.3 billion over the same period.
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According to current FDA rules, products containing CBD – a hemp extract that does not excite the user – can not be sold beyond the limits set by the state, and products containing CBD can not be marketed as a dietary supplement or for health. This means that it can be difficult for companies that produce and sell CBD-based products to describe what they offer to consumers.
Take Curaleaf for example. It took a hit last week after the The FDA sent a letter to the company saying that some of its products are not approved for sale in the United States. Stocks also came under pressure after CVS Pharmacy announced that it would attract Curaleaf products of its stores.
Other companies have also challenged the FDA's letters. In 2017, the FDA sent a similar letter to Charlotte's Web Holdings, then called Stanely Brothers. This year, the FDA also sent a letter to PotNetwork Holdings, which has slightly reduced its inventory, although it has since recovered its losses.
"It's a tightrope for these businesses to walk," Gomez said.
But confusion at the federal level has also boosted marijuana stocks in some cases. While cannabis is becoming more common and companies are starting to enter public markets – US companies in Canada and Canadian companies in the US – more and more money has been injected into the country. 39; industry.
"The federal government's position on cannabis has made the work of the cannabis industry more difficult, but this industry remains one of the fastest growing industries in the United States," said Steve Deangelo, cannabis activist and co-founder of Harborside. , a cannabis company in California.
Another hearing earlier in the week on cannabis banking reform Tilray, Canopy Growth and Aurora gained 2%, after positive signs from Senate-Bank President Mike Crapo that the SAFE law would face no obstacles.
The shadow zone in the CBD market has also presented an opportunity for cannabis companies, said Gomez. For many consumers, he played a role in standardizing the idea of using a cannabis-derived product and led to discussions about legalization.
"We do not know what the future holds, we are in the midst of a cultural change in favor of cannabis, the CBD has helped to accelerate this change," said Martin Lee, director of the CBD project.
Market potential, which badysts say could reach 16 billion dollars from here 2025, also pushed up the shares. When Cronos announced its intention to enter the US CBD market over the next year, it has gained more than 15%.
It also attracted talent and transactions that boosted stocks. Cronos jumped more than 3% when he announced that a veteran of Mondelez International, the maker of Oreo cookies, would become its director of innovation. In August 2018, the Constellation Brands beer conglomerate paid $ 4 billion for a 38% stake in Canopy, which was the first major investment in a marijuana grower.
Canopy growth also reached a major deal when it pbaded $ 3.4 billion to acquire Acreage Holdings, an American pottery company, waiting for the federal legalization of marijuana in the United States. Tilray jumped 18% when it announced its intention to join Privateer Holdings, its majority shareholder, and extended its stock holding period.
New legislation recently introduced could also move the industry forward. The presidential candidates, Senator Corey Booker, Senator Elizabeth Warren and Senator Kamala Harris with The House Judiciary Committee Chair, Jerry Nadler, has all tabled various marijuana bills, which include decriminalization at the federal level, or let the states do it.
The consensus is that legalization will take place at some point – it's a question of "how," not "when." Companies have already taken advantage of – Whole foods and Coca-Cola indicated that they were monitoring the market and Heineken and Molson Coors developed products containing CBD or THC.
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