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Investors in cannabis-producing companies in North America were still digesting the results of Tuesday's US mid-term elections – which had seen three-state voters legalize cannabis in one way or another – when the sudden resignation of US Attorney General Jeff Sessions rocketed stocks in this sector on Wednesday.
"The entire space is now focused on news from Sessions," said Russell Stanley, general manager of equity research at Beacon Securities Ltd. "The sector has seen the sessions as a major obstacle to legalizing cannabis. This risk has been removed – the industry, particularly companies with greater operational benefits from the United States, are reacting to this. "
In January, Sessions issued a memo on marijuana enforcement that overturned Obama's non-interference policy with respect to state-sponsored marijuana laws. This note triggered a bipartisan reaction that culminated in the STATES Act, a bill introduced by Democratic Senator Elizabeth Warren and Republican Senator Cory Gardner, who pledged to prevent any interference by the federal government in the United States. who have legalized cannabis.
"The Sessions memo actually galvanized the legalization movement and forced them to go around the trolleys, which went back completely against the Sessions," Stanley added.
Shares of companies on both sides of the border made significant gains after the revelation of Sessions was replaced by its former chief of staff, Matthew Whitaker.
Vancouver's Tilray recorded a nearly 30% rise in Nasdaq-listed shares, while MedMen Enterprises of California rose 7% on the Canadian stock market. Other important players such as Canopy Growth Corp. and Aurora Cannabis both saw their stock prices increase about 7% by the end of the day, while the Aphria rose by almost 5%.
The gains came after a lukewarm investor reaction at Tuesday's mid-point, when Michigan voters voted for the legalization of cannabis for medical and recreational purposes, while those in Missouri Utah had approved voting measures authorizing the sale of medical cannabis.
As a result of the vote, recreational cannabis will soon be legal in 10 US states, while medicinal cannabis will soon be legal in 33 states plus the District of Columbia.
While the departure of Sessions was a major victory for cannabis investors, a loss suffered by another session could have an even greater impact, according to Martin Landry, an analyst at GMP Securities.
Texas Republican Pete Sessions lost its seat in the US House of Representatives in favor of Cannabis-friendly Democratic candidate Colin Allred, a former NFL player, one of many victories in which Democrats have resumed the control of the House.
Pete Sessions led the House Rules Committee and actively prevented the House from voting on the marijuana amendments.
"A chairman of a Democratic committee will have a significant impact on cannabis reform, and may speed up the approval of STATES law," said Landry.
While the Democrats' victory could also increase the chances of federal legalization in the United States, some prefer the current rate of additional earnings.
"I hope they will not legalize the federal anytime soon," said Marc Lustig, CEO of Origin House (formerly CannaRoyalty).
Origin House is a Canadian-based cannabis products and brands company operating primarily in California, where it supplies cannabis brand products to accredited clinics. Companies like his are currently among the only means by which investors can gain exposure to the US cannabis industry.
A Democratic Committee Chair Will Have A Significant Impact On Cannabis Reform And Will Perhaps Speed Up The Approval Of The STATES Act
Martin Landry, Analyst
"There is no doubt that when federal legalization takes place in the United States, huge conglomerates like pharmaceuticals, tobacco and alcohol will start buying everything that is possible. The fact that he remains as he is now has allowed us to build our chess board, "said Lustig. "If the STATES Act is passed, it is as perfect as possible for us."
However, it is unclear whether the implementation of the STATES law will allow US cannabis companies to be publicly traded – which is their biggest disadvantage compared to their Canadian counterparts.
"If you are listed on the TSX, Nasdaq, NYSE or any of these major stock exchanges, you can not touch the plant in the United States. I'm not sure that the STATES Act will change that. It will simply mean that different states have the right to determine how cannabis can be consumed and moved within its borders, "Landry said.
For licensed producers such as Aurora Cannabis, the wave of optimism about cannabis in the United States is a positive development, even if the real victory lies in the possibility of gaining a competitive advantage in the drug market. south of the border.
"We are ready and ready to enter the US market as soon as it's legal to do so," said Cam Battley, CEO of Aurora. "What we will not do is jeopardize our listing on the NYSE or the Toronto Stock Exchange – but if it is acceptable, we will not participate in the violation of US law."
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