A critical ruling from the Arizona Court of Appeals against cannabis extracts resulted in a stock price decline for a public cannabis operator in the state.
On Tuesday (June 26) the Arizona Court of Appeals ruled against a motion on whether hashish (cannabis resin extracts) is exempt from prosecution thanks to the Arizona Medical Marijuana Act (AMMA).
MPX Bioceuticals (CSE:MPX), a cannabis operator focused in the US market suffered a severe drop to its share price on Wednesday when it closed at C$0.85, a 14.14 percent decline from its previous close. After the public markets closed MPX finished the day as the cannabis stock with the highest reduction to its value on the Marijuana Index. CannaRoyalty (CSE:CRZ), another US focused operator trading on the Canadian Securities Exchange (CSE) was also in the red with a 7.43 percent decrease in share value for the day.
A 2-1 vote determined AMMA does not in fact cover the extracts. According to the ruling from the court, AMMA is “silent” when it comes to a protection of hashish. The court successfully argued “AMMA immunizes medical use of a mixture or preparation of the marijuana plant does not immunize hashish.”
These extracts provide a whole different venue of cannabis products like cartridges for vape pens and oils. As the cannabis market expands with a legalization movement, experts have said the variety of products and consumer demand will grow as well.
The Phoenix New Times reported the deciding judges said authors of AMMA should have been more direct with their definitions. “If the drafters wanted to immunize the possession of hashish they should have said so.”
The decision also retained the conviction of a locally registered medical cannabis patient, Rodney Jones, who served time for the possession of a jar with 0.050 ounces of hashish.
Cannabis investors react to defeat for extracts in Arizona courts
During Wednesday’s (June 27) early trading session MPX suffered a dramatic dip to its stock value reaching a low of C$0.82 per share. As the day progressed the shares started to recover but in the end it was a red day for MPX.
MPX had seen a run-up in its Arizona operations and results from the start of 2018. The company reported C$5.2 million in revenue from sales of cannabis and concentrates in the state during the month of March.
The company purchased assets from local cannabis ventures in an effort to expand its presence in Arizona. Scott Boyes, CEO of MPX said these new assets had recorded 12 month revenues of US$15 million. In April the company added a fourth dispensary to its portfolio in Arizona.
CannaRoyalty invested in a cannabis company called Alternative Medical Enterprises (AltMed), which opened its first Phoenix-based dispensary in August of 2017. “The successful grand opening of the first MüV by AltMed dispensary in Arizona is an important milestone for AltMed and for CannaRoyalty shareholders,” Marc Lustig, CEO of CannaRoyalty said in a statement.
AltMed CEO Michael Smullen said the dispensary saw over 1,000 patients during first week of business in Arizona. Earlier in the year AltMed raised US$35.4 million as an effort to expand its operations in Florida and Arizona.
CannaRoyalty’s decline dragged on throughout the trading session reaching a low of C$4.81 but eventually settling in at a price of C$4.86 by the market closure.
Beth Stavola, chief operating officer and president of company’s entire US operations, previously said Arizona was a “great state” for the company to conduct its businesses. MPX and CannaRoyalty hold interests in other legalized states like Massachusetts, Nevada and California.
As recent as April Echelon Wealth analyst Russell Stanley maintained an enthusiastic sentiment on MPX’s operations in the US. The issued note from Stanley to investors, according to Cantech Letter, retained a ‘Speculative Buy’ rating from the analyst and gave the stock a one-year price target of C$1.40.
Also in April Matt Bottomley, analyst with Canaccord Genuity, gave a ‘Buy’ rating to CannaRoyalty and slapped a C$7.50 price target for the company.
MPX: court ruling in Arizona will face an appeal
Following the ruling MPX issued a statement to INN saying the result will likely be met with an appeal. MPX added attempting to differentiate between cannabis and marijuana as the courts attempted in their decision is “fraught with opportunity for conflicting interpretations.”
“The unfortunate consequence of this decision, if not stayed or reversed, is the harm that it will cause to patients who will be denied more convenient and effective forms of delivery of their cannabinoid-based medicines,” MPX told INN. “We have consistently lauded the regulatory environment for the use of cannabis in Arizona and are confident that the ultimate decision will fairly consider the well-being of the patients.”
Despite this ruling, the Phoenix New Times speculated dispensaries in the state will likely not remove extracts-based products up until a ruling from the Arizona Supreme Court. However, for a company like MPX the verdict has already affected their shares for today.
Across the board cannabis stocks have been facing declines in value following the confirmation of Bill C-45 in Canada, the Cannabis Act, set to legalize the drug starting on October 17. MPX confirmed the purchase of a Canadian licensed producer (LP) in June. CannaRoyalty holds a partnership with Canadian dispensary operator National Access Cannabis (TSXV:META).
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Editor’s Note: This story was updated with a statement from MPX Bioceuticals.
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.