Marijuana Stocks to Take a Hit After Delay in Canada Recreational Pot Legalization?

Marijuana Stocks

Pot Legalization Delayed in Canada

There’s nothing to be done about it now; we’ve seen pot legalization delayed in Canada. As you might expect, this is hardly good news for the marijuana industry (and Canadian marijuana stocks specifically), but weed investors can rest easy; this is a minor speed bump at best.

Prime Minister Justin Trudeau ran his campaign on a promise that recreational weed legalization would be undertaken and completed under his watch, and his government had planned for legislation to be passed as early as July.

Unfortunately, due to a delay brought down from the Canadian Senate, marijuana legislation is now scheduled for a June 7 vote by that legislative body. While the Senate (which is not democratically elected) will almost certainly not vote down the bill, the delay will push back the timeline of legalized marijuana in Canada.

So what does that mean for Canadian marijuana stocks? In the short term, they’ll and have taken a hit. Many of the top stocks are down around or over five percent as of early afternoon trading on Friday.

Long-term, however, this doesn’t really change the equation all that much.

You see, this is a more a political game than a genuinely legislative one. There is no going back on marijuana legalization now. The Liberal Party has the votes to push the legislation through, and the Senate can do little more than delay it (it is largely a symbolic house of parliament, usually providing nothing more than rubber stamps and honorifics to its members). The Senate could amend the marijuana bill, at which point it would be sent back to the House of Commons, but the chances of the bill being killed are next to zero.

Canadian marijuana legalization is coming. That’s settled. The only question that remains is when.

Right now, the earliest date that Canadians would be able to get their hands on federally approved recreational marijuana would be by August, although that represents the best case scenario.

Provincial and territorial governments will need eight to 12 weeks following royal assent to prepare for retail sales. Royal assent would likely be given almost immediately following Senate’s approval of the bill on June 7 (provided the upper house doesn’t bounce the bill back to parliament with amendments).

“I am pleased to say that we secured time that will allow the Senate to have a thorough evaluation on the marijuana legislation,” Conservative Senate leader Larry Smith said in a statement.

“The official Opposition in the Senate has been clear from the beginning, we want to review the wide-ranging concerns and voids in this legislation, instead of rushing this through only for the sake of a political deadline set by the Trudeau government.” (Source: “Senate deal to vote on pot bill on June 7 means no sales before August,The Toronto Star, February 15, 2018.)

It’s important to see what’s going on behind the scenes. Conservatives politicians in Canada are likely delaying the bill as long as possible to appeal to their base. This means that legalization could conceivably face further delays through political maneuvering, so there may be more delays to come.

How Canadian Marijuana Stocks are Affected

It goes without saying that this is bad news for Canadian marijuana stocks. But this is, after all, just a delay. While it will hurt Canadian marijuana stocks short-term, there’s no reason to believe that pot legalization is in jeopardy.

While it has extended the pot legalization timeline, it has done little to affect the overall outlook of the marijuana industry.

Still, let’s take a look at some of the damage done by the delay:

Aphria Inc. (OTC:APHQF), (TSE:APH): Aphria stock dropped by about six percent.

Canopy Growth Corp (OTC:TWMJF), (TSE:WEED): Canopy Growth stock took a hit of 5.2%.

Aurora Cannabis Inc (OTC:ACBFF), (TSE:ACB): Aurora Cannabis stock dropped by nearly six percent.

MedReleaf Corp (OTC:MEDFF), (TSE:LEAF): MedReleaf stock took a 8.5% dive.

Marijuana Stock Chart
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Analyst’s Take

While the numbers are less than ideal, ultimately this will be a hiccup and not a disaster. Canadian marijuana stocks will potentially take hits for the next few days, followed by more setbacks should further delays ensue, but all those losses will be wiped away when Canadian marijuana legalization does come either in late summer or early fall.