Why Hexo, Canopy Growth and Aurora cannabis stocks just collapsed – .

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Why Hexo, Canopy Growth and Aurora cannabis stocks just collapsed – .


What happened

Almost a year ago, with the 2020 presidential election approaching, then-Democratic vice presidential candidate Kamala Harris pledged to support legislation that “will decriminalize marijuana” and continued, “We will erase the records of those who have been convicted. of marijuana. “

Almost a year later, that promise is nearly fulfilled with the unveiling of a new bill in the U.S. Senate to legalize recreational marijuana. And yet, marijuana stocks are dropping in the news. At 2:15 p.m. EDT trading, shares of Hexo (NYSE : HEXO) and Canopy growth (NASDAQ : CGC) are both down 5%, while Aurora Cannabis (NASDAQ : ACB) the stock is even further down – 7.8%.

Why is that?

Image source: Getty Images.

So what

At first glance, today’s news seems like good news for marijuana stocks. Delivering on Vice President Harris’ promise, the new Cannabis Administration and Opportunities Act, rolled out today by Senate Majority Leader Chuck Schumer, promises to “downgrade cannabis to the federal level, to clear previous convictions ”and“ allow people to ask for a new sentence, ”according to an analysis by MarijuanaMoment.net.

On the flip side, the bill does not legalize the use of marijuana across the country, as its language explicitly allows individual states to ban the drug if they choose. It also threatens the attractiveness of the marijuana business by levying federal taxes on marijuana sales – 10% initially, and up to 25% over time, and these taxes will likely be superimposed on all state taxes. already imposed.

This will not necessarily be good news for marijuana sales, even if the bill becomes law.

Now what

And of course, that perhaps brings us to the biggest objection to today’s news: the fact that it’s not really a “bill” presented for Senate consideration, but only of a “first draft” that the senator released for public comment.

Over the next 60 days, according to MarijuanaMoment, “advocates and stakeholders” will have the opportunity to criticize the language of the bill and potentially criticize many of the provisions that investors (initially) liked about it. Then comes the next hurdle, forcing 60 senators to vote for the final version of the bill, a road that will be “rough,” according to TheHill.com, but necessary if the bill is to survive any attempted filibuster.

Indeed, as TheHill.com reported, Senator Schumer “does not currently have the votes to pass the legislation” – but he presented it nonetheless. It remains to be seen whether the comment period will result in a final invoice wording that can garner sufficient support. For now, however, the price reaction we are seeing in marijuana stocks suggests that the outlook for passage is weak.



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