Canadian Marijuana Legalization Win Boosts Stocks

Canada marijuana legalization
iStock.com/underworld111

Recreational Marijuana Stocks in Canada

Earlier, we covered how the push for recreational marijuana legislation had been delayed by a concerted effort on the part of the Conservative Party, the political opposition to the Liberal Party, which currently sits in power in Canada. But last week, we saw a major legislative win for Canadian marijuana legalization, boosting a number of Canadian marijuana stocks as a result.

While I wrote then and maintain that the move to delay was little more than posturing and had virtually no chance of actually killing the marijuana bill, it did have the potential to delay its passing, which is what happened.

The bill was bounced back to Canada’s Senate, a house of parliament but one where Senators are appointed rather than elected. As such, it is typically little more than an honorific position where senators often rubber stamp most legislation that comes their way via the House of Commons, Canada’s democratically elected legislative branch.

This time, however, there were threats from sitting senators that the marijuana bill may be different and that the bill would have to be sent back to Parliament.

Due to movement in the Senate, the bill had already been delayed from taking effect sometime in summer 2018 to August at the earliest, with its implementation potentially being pushed back further into the fall.

The overall effect of this political maneuvering was that a few weeks were lost, but the markets reacted harshly at the time and sent marijuana stocks falling. After all, not everyone is well-versed in Canadian politics, and hearing about delays and problems in the Senate—especially to American observers where the Senate is one of the most important parts of government—can cause investor panic.

But while the delay did cost investors on the stock market, it did no lasting harm.

That brings us to the current news: the Senate passed the bill in its Second Reading vote.

This means that the bill will not be bounced back to Parliament…yet.

Now a number of committees will be taking a look at the bill, with the option to propose amendments and other additions to the legislation. The bill would then have to be passed by Parliament again, but it is highly unlikely that any of the proposed amendments will cause the bill to die on the Parliament floor.

“We’re working closely with the Senate and we feel confident, at this time, in that timeline of end of summer that we’re going to see a regime that will control and legalize cannabis,” said Mark Holland, Parliamentary Secretary to the Minister of Public Safety and Emergency Preparedness, in an interview with The West Block. (Source: “Government plans to legalize pot are on track for ‘end of summer’,” Global News, March 25, 2018.)

The final takeaway is that things are back on track in Canada.

While the recreational marijuana bill in Canada was never truly in danger, these types of delays are still prone to wreaking havoc on stock value as some investors assume the worst and pull out their money before they believe the floor will fall out.

As it stands, the move by the Senate signals that Canadian marijuana legalization is on its way and that marijuana bulls have nothing to fear in terms of the process being derailed.

Analyst Take

The vote put a lot of minds at ease, at least for now, and assured investors that the process was still churning along, albeit at a slower pace than marijuana bulls would prefer.

The recreational marijuana bill in Canada is going to come, and when it does, it’s going to boost many marijuana stocks through the roof, should projections hold.

There’s a good chance that we’ll see massive gains across the industry should the whole process go smoothly, which is, of course, a big caveat, but still makes it one of the more exciting times to be involved in marijuana stocks, particularly Canadian marijuana stocks.

For investors already in possession of Canadian marijuana shares, this good news may not directly impact your portfolio today, but down the line, you can bet that so long as the Senate plays its part and doesn’t get too wild, that will be worth more than the best quarterly report.