Marijuana News Today: Pot Stocks Could Have Second Rush in Canada With Edibles

Marijuana News Today
iStock.com/RoschetzkyIstockPhoto

Marijuana News Today

October 17, 2019 is looking to be another big day for pot stocks as Canada sets the date for edibles to be legalized. But the marijuana news today has critics saying the proposed regulations take things too far.

In what has been a common story out of Canada ever since recreational marijuana legalization came into effect, government regulators seem to be overstepping their mandate.

Instead of keeping things safe for pot consumers, governments are pushing consumers to use the black market by making legal products too onerous to use under heavy regulations.

At least that’s part of the criticism coming from pot supporters who have criticized the recent regulation proposals on edibles in Canada.

Advertisement

Edibles are one of the more exciting marijuana products, in my mind, because they offer the most innocuous entry into pot. While many people are turned off by smoking, being able to eat a brownie that gives you a buzz is enticing to first-time customers.

Of course, that’s part of the point that Canadian regulators are trying to make: kids love sweets, after all, and it wouldn’t be inconceivable to have children trying to get their hands on weed candies and desserts.

But the regulations being put forward are, at least on the surface, rather harsh.

Edibles, extracts, and topicals are set to be legal no later than October 17, and Health Canada has entered a feedback period in order to try to get its regulations right.

Critics have slammed some regulatory proposals, like limiting servings to only 10 milligrams of tetrahydrocannabinol (THC). Some medical edibles used for pain relie have concentrations as high as 650 milligrams, for instance. (Source: “Proposed edible pot rules are wasteful, would leave products tasteless: critics,” CTV News, February 21, 2019.)

Each serving would also have to be individually wrapped, which critics argue would have undue environmental effects.

And, of course, heavy restrictions will abound on marketing, so as not to appeal to children.

“Health Canada welcomes licensed processors to use innovative and environmentally sound packaging approaches, provided the requirements in the regulations are satisfied,” said Health Canada spokesperson Tammy Jarbeau.

You’ll recall that part of the reason—some would argue the biggest part—that we’re seeing marijuana shortages across Canada post-legalization is due to regulatory interference.

One of the main problems, producers have argued, is the packaging law requiring individual stamps of approval to be placed on cannabis products, greatly slowing down the production process while making supply lines stop dead in their tracks when those stamps run out or are late in being delivered.

We’ve seen the effect play out in Canada in that sales have been lower than some of the projections.

Edibles could be a really tasty new segment of the marijuana market that would help juice pot stock gains as the year wraps up. But it in order to accomplish that, Canadian regulators will have to give the industry more leeway.

CGC Stock

The marijuana news today on the pot stock market was rather dull in terms of  early-morning trading. Many pot stocks remained stagnant or saw little gains or losses. On the news front, however, several major developments took place.

Canopy Growth Corp (NYSE:CGC) has set out plans to open a licensed retail location in London, Ontario in April.

Ontario, which is Canada’s most populous and richest province, has delayed brick-and-mortar retail pot locations until April, due to a change in its provincial government—and therefore marijuana policies—last summer.

Canopy Growth has partnered with Alimentation Couche-Tard Inc. (TSE:ATD.A), a massive Canadian convenience store operator with locations across Canada, the U.S., and Europe. (Source: “Alimentation Couche-Tard and Canopy Growth to Support Cannabis Retail in London, Ontario,MarketWatch, February 21, 2019.)

In the U.S., it is the largest independent convenience store operator in terms of locations.

This partnership could be very important for a number of reasons, chief among them being Alimentation’s huge international presence.

While the retail store opening in London is fine and dandy (and intelligently skirts regulations on marijuana producers owning only 9.9% of any retail location by entering a branding agreement with an independent operator), the long-term projection for CGC stock is far more interesting to us.

If Canopy Growth and Alimentation continue to develop this partnership over the coming years, the former could see huge gains by leveraging this partnership to put its products in convenience stores across the world.

Of course, this is very much dependent on how pot laws evolve in each individual country over the coming years, but the potential is certainly there.

CGC stock didn’t see much movement in early-morning trading today, however, falling about 0.5% to finish the week. Over the past five days, it has fallen about three percent.

Still, as usual, the long view on Canopy Growth Corp has continued to improve as the company scores another big win in the headlines with its Alimentation partnership.

TLRY Stock

Tilray Inc (NASDAQ:TLRY) also made headlines this morning in a way that may be unsurprising to anyone who follows the marijuana news.

Shareholders approved the deal between Tilray and Altria Group Inc (NYSE:MO), the makers of “Marlboro” cigarettes. Altria will invest about $2.0 billion into Tilray, for a 45% stake in the company. (Source: “Cronos Group Inc. Shareholders Approve C$2.4 Billion Strategic Investment from Altria Group, Inc.,” Nasdaq, February 21, 2019.)

This was a major deal at the end of 2018, and now that it’s signed, TLRY stock has once again catapulted onto the scene as a top pot stock.

I’ve had my doubts about Tilray stock at different stages of its development. In this case, however, I feel that Tilray Inc is exiting the hype stage of its maturation at last and is finally inking very important deals that will help propel it forward in the long term.

Teaming up with Altria not only gives Tilray access to a ton of capital and resources, but also solidifies the company as a legitimate option that has more to offer than just flashy projections.

Much like Canopy Growth, Tilray will also have the ability to leverage Altria’s international presence as time goes on and more countries legalize pot—a huge boon for the company.

TLRY stock fell in early-morning trading today by about 1.5%.  Over the past week, Tilray stock gained about two percent.

CGC and TLRY Stock Performances

The performances of CGC stock (black line) and TLRY stock (blue line) over the past week are seen on the chart below:

Chart courtesy of StockCharts.com

Analyst Take

The marijuana news today has us concerned with Canadian regulators while pot stocks solidify major international partnerships.

While regulations are necessary and a public good, in this case, there may be some overstep. After all, regulators have already harmed part of the legal marijuana industry in Canada.

I’d like to see them take a step back and be a little more permissive. After all, most studies have shown that pot is far less dangerous that alcohol, yet there exists far fewer fetters on alcohol marketing, packaging, etc.

On the pot stock market, major deals were either signed or announced, and both cases show the potential for stock gains down the road.