Marijuana News Today: Canadian Taxes Could Hurt Marijuana Stocks; Pot Stock Market Rebounds

Marijuana News Today
iStock.com/Mary Wandler

Marijuana News Today

The marijuana news today features another unfriendly move by the Canadian government directed at the marijuana industry, this time by way of taxes and a lack of coverage for medical marijuana.

Canada, already known for its relatively high taxes, is looking to add on additional levies on marijuana with an excise tax of CA$1.00 per gram or 10% of the retail price, whichever is greater, on both recreational and medicinal marijuana. (Source: “Medical marijuana users brace for tax hike,” CBC, July 18, 2018.)

This will come into effect on October 17, when weed is legalized across the country. Medical marijuana users already pay the HST tax on their medicine, unlike other prescription drug users.

Marijuana taxes are even more of a burden when you consider that that certain government assistance programs refuse to cover medical marijuana. The Ontario social assistance program, for instance, will cover drugs like opioids, but will not help its beneficiaries when it comes to medical marijuana.

That opioids are covered by government programs while cannabis products are given the short end of the stick boggles the mind, especially when you consider the wide breadth of information available on both the negative impact of opioids and the opioid epidemic in general.

But the government’s folly seems to extend further. It argues that the matching taxes on both recreational and medicinal marijuana are to deter recreational users from claiming ailments in order to receive medical marijuana and avoid taxes. Fair enough.

Where the government loses me, however, is when it released a statement claiming that the taxation scheme “will support the Government’s twin goals of keeping cannabis out of the hands of youth, and profits from its sale out of the hands of criminals.”

Let’s think this through: making it more expensive to buy legalized marijuana is going to drive people away from the potentially cheaper black market? Somebody must have skipped one too many Economic 101 classes.

In any case, the end result of higher prices could be lower sales, which will, of course, hurt marijuana stocks moving forward.

There is an interesting tidbit here, however, as it applies to the marijuana stock market. Canopy Growth Corp (NYSE:CGC) has already come out and said that it will absorb the cost of the new tax for its medical customers. That’s a bold move from the company, and one that could pay off with more people switching to Canopy’s marijuana products versus its more expensive rivals.

While I’m sure other marijuana producers will follow suit if the gambit is successful, it could help differentiate Canopy from competitors and lead to better sales.

In any case, the pot stock market will survive the tax hikes. Increased revenue on the government’s balance sheet is good news, if only to show other countries just how much money is out there for them to collect. But marijuana is still getting shafted by the government in some key areas, and that needs to change.

Cronos Stock News

The marijuana news today on the pot stock market is, in contrast to the political news, positive. Or positive for one stock we will be covering today, at least.

The first marijuana stock we’ll be taking a look at is Cronos Group Inc (NASDAQ:CRON). CRON stock has become one of the better performers of late, when the industry is facing a bit of a downturn following the fervor of the Canadian marijuana legalization date being announced.

Chart courtesy of StockCharts.com

While Canopy Growth and other heavy hitters have taken big hits themselves to their stock value, Cronos has been able to weather the storm quite well. CRON stock has not been gaining with any sort of speed, but it hasn’t plummeted either, and in this current market, that’s worth something.

Cronos stock is up about half a percent on the week so far and continues to perform admirably, relatively speaking.

The company also announced an 850,000-square-foot expansion by way of a greenhouse being built in Ontario, bolstering the company’s production capacity in the lead-up to Canadian marijuana legalization. (Source: “Cronos Group Inc. Announces Capacity Expansion with Premier Greenhouse Expert,” Cision Ltd, July 18, 2018.)

Aurora Cannabis Stock News

In contrast, Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB) has been battered by the recent drawback. Aurora Cannabis stock is down about one percent on the week, but over the course of July, the company has fallen by over 15%.

Note that Aurora Cannabis stock is still in the midst of its acquisition of MedReleaf Corp (OTCMKTS:MEDFF, TSE:LEAF). MedReleaf shareholders approved the deal just yesterday, but that did not translate into stock gains for either company.

“Today’s vote demonstrates the strong shareholder support for the arrangement with Aurora, as the strengths of our organizations should accelerate our efforts to set the standard for the cannabis industry on an international scale,” said Neil Closner, CEO of MedReleaf. (Source: “Analyst Take

The government needs to get its act together if it wants to fully optimize the marijuana industry, both for its own coffers and for the consumers.

Higher taxes won’t break the industry, but a number of unfriendly actions have compiled to make the Canadian marijuana industry less efficient than it ought to be.