Task Force on Cannabis Legalization: Investors Be Aware

On Tuesday, the Canadian government released its task force regarding the legalization of recreational marijuana, which sent pot stocks flying.

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The Canadian government released its task force on the legalization of marijuana on Tuesday (December 13), and consumers aren’t the only ones riding a high from the announcement.

Ann McLellan, a former federal Liberal cabinet minster and head of the report, told the Business News Network (BNN) that the report, “presents measures to create a viable legal market, which will be essential to meet the government’s objective of displacing the entrenched illicit market that exists in Canada today.”

To that end, a few highlights of the 106 page report–which had more than 80 recommendations–include:

  • consumers should be at least 18 years of age to purchase;
  • sales should be regulated at a provincial and territorial level;
  • public possession to be limited at 30 grams of dried non-medical cannabis or an equivalent;
  • that there should be a limit of four plants per residence for growing.

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In that regard, Alan Brochstein, analyst at 420 Investor, told the Investing News Network (INN) in an interview that the task force report “was not full of surprises.” He said it was a deliberative process, but notes  he fears “investors are putting the cart in front of the horse.”

“It’s very obvious that Canada is going to legalize, but it’s not so clear what that’s going to look like or what the time frame is going to be,” he added.

What’s more, Brochstein said that whenever there’s updates on legalization of cannabis–including the task force announcement–it gets “spun in a positive way.” He also commented that the release of the report didn’t throw any curveballs. Importantly, he said we shouldn’t expect first legalized marijuana sales until mid-2018.

“Between now and 2018, there’s not a lot for investors to go on, except what’s going on in the medical market, which remains pretty positive,” he added.”There’s a huge amount of embedded capital gains in the sector.”

On that note, Brochstein said it’s very positive that the government shows concern with respect to harm reduction, safety, and access to minors in the black market. “All these things bode very well for the supply, cultivation, and processing being done by the existing LPs.”

Still–it’s big step forward in an already blooming and thriving industry, and companies are feeling the excitement.

In a statement, Bruce Linton, CEO of Canopy Growth (TSX:CGC), said the report is ‘good news’ for Canadians and provides a strong policy framework.

“We think it confirms that the current medical system for production is working and should form the backbone of ongoing production into the future,” he said. “It recognizes the value of limited grow-at-home and diversity of producers and access methods.”

Following the task force announcement, shares of the company rose 7.9 percent to close at $10.79 on Tuesday.

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In a separate announcement, Aurora Cannabis (TSXV:ACB) also gave its nod approval over the task force report. Terry Booth, the company’s CEO, said the company is “very pleased” by many of the recommendations made, which includes maintaining a separate medical access framework for patients.

“We also support the report’s comment with regard to the need for federally supported research into the use of cannabis and cannabinoids for medical purposes, with the explicit aim of facilitating their market authorization as drugs,” he said in the release.

Shares of Aurora Cannabis saw an increase of 6.09 percent for the one-day period, closing the day at $2.44 each.

Other cannabis stocks that also saw an increase include: Mettrum Health (TSXV:MT) (who signed an agreement last month to be bought by Canopy), whose shares increased 7.67 percent to $7.16; shares of Aphria (TSXV:APH), rose 5.33 percent to $5.34; and, OrganiGram Holdings (TSXV:OGI), whose shares spiked 4.95 percent to close the day at $3.39.

Don’t forget to follow us @INN_Resource for real-time news updates.

Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Mettrum Health is a client of the Investing News Network. This article is not paid for content.

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Comments
  • Either way you look at your title of investors needing to be aware. Seems a bit of fear mongoring to get readership. Aware of what exactly. Perhaps that legalization will come and those invested will undoubtedly see their investments do nothing but go up between now and the day of legal enlightenment.
    There’s nothing to be scared of, other than what to do with profits gained.

    Reply

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