Cannabis producer stocks rose Monday after another US state voted to legalize it over the weekend. As of 11:45 a.m. EST, stocks of several were trading higher:
Aphria (NASDAQ: APHA)up 6.7%;
Canopy growth (NASDAQ: CGC)up 6.6%; and
Aurora cannabis (NYSE: ACB)by 7.6%.
Any news of advances in marijuana legalization usually drives the stocks of pot companies higher. On Saturday, Virginia became the 16th state and the District of Columbia to approve the legalization of adult recreational marijuana. Governor Ralph Northam has yet to sign the bill but supports legalization that will enable the sale in 2024.
Canadian marijuana companies will not be directly affected by state legalization in the US. However, stocks are rising as investors see a path to federal legalization as more states vote in favor. Canadian pot growers need federal legalization to enter the U.S. market, but Aphria and Canopy Growth have been actively preparing for the opportunity.
Aphria implemented its strategy of gaining a foothold in the US last fall when it acquired US craft brewer SweetWater Brewing Company for around $ 300 million. SweetWater is currently available in 27 states as well as Washington, DC. Aphria said it plans to “have a platform and infrastructure within the US to allow faster access to the US market in the event of federal legalization.”
Canopy Growth has made its way into the US market through beverage companies Constellation Brands. Constellation added nearly $ 200 million to its initial $ 4 billion investment in Canopy Growth, invested through warrants last year.
Aurora Cannabis has not yet established a distribution framework for potential US sales. But investors have been looking for something to whip the troubled producer back into shape. Shares have fallen nearly 90% over the past three years, and the company has confirmed that it is working on a business transformation.
Marijuana stocks have drawn speculative interest among investors since Canada legalized recreational use more than two years ago. The potential of the US market is arousing even greater interest even for Canadian companies. Investors should be aware that companies need federal legalization in order to conduct cross-border business transactions. However, news of another lawmaker voting in favor of legalizing pot use gives investors more hope that at some point companies will have a huge new market to compete in.
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