Canadian Cannabis Stocks Rise on Election Results

On Monday night, Canada’s Liberal Party surged to a majority government win, ousting the Conservative Party from power. The medical marijuana sector is set to benefit from the Liberal win, and cannabis stocks are already reacting favorably to the victory.
Since the start of the election campaign, newly elected Prime Minister Justin Trudeau has made it clear that he will make legalizing marijuana across Canada a priority. In fact, speaking to CTV News at the end of September, he said that if elected he and the Liberal Party would begin working to regulate and legalize marijuana “right away.”
Unsurprisingly, many Canadian cannabis stocks jumped on Tuesday on the news. Canopy Growth (TSXV:CGC), formerly Tweed Marijuana, was up 4.59 percent, at $2.28, as of 12:30 p.m. EST, while Organigram (TSXV:OGI) had risen 7.69 percent to hit $0.56. Both companies are authorized licensed producers under Health Canada’s Marihuana for Medical Purposes Regulations.

Canadian marijuana law reform?

Laws surrounding the production, use and sale of marijuana in Canada have been a little hazy since the Marihuana for Medical Purposes Regulations (MMPR) were introduced in April 2014. The MMPR introduced a list of authorized producers for medical marijuana users can go and essentially fill their prescriptions, much like a pharmacy. That’s different from the old system set up in 2001, under which individuals with medical issues could grow their own marijuana.

However, despite the introduction of the MMPR, marijuana is still considered illegal in Canada on a federal level, and possession without a medical prescription is considered an offense. As a result, Canadians can receive criminal records for possessing small amounts of the drug.

Trudeau hasn’t provided a timeline for how soon changes will happen, saying that he and the Liberal Party “don’t yet know exactly what rate we’re going to be taxing it, how we’re going to control it, or whether it will happen in the first months, within the first year, or whether it’s going to take a year or two to kick in,” as per CBC News.

Even so, medical marijuana users, as well as companies working in the cannabis space, are undoubtedly pleased that the emerging industry will have a chance to grow. While there are few estimates out there for how much a legalized marijuana sector could benefit Canada’s economy, looking at the US states that have legalized it offers some clues.

For example, Colorado’s recreational marijuana sales were nearly $60 million in August, and surpassed $100 million for the month when paired with medical marijuana sales. What’s more, Oregon generated more than $11 million from recreational marijuana in its first week following legalization on October 1, surpassing Colorado’s first week of sales, which came in at $5 million.

In a note put out Tuesday, Dundee Capital Markets estimates that by 2024, a Canadian recreational marijuana market could generate $2 to $5 billion annually. That would be in addition to the $1.2 billion generated by the medical cannabis market. The firm used three separate methodologies to get the estimate, including Statistics Canada 2012 information, Colorado’s recreational sales numbers and information from US research firms.

“Canadians are already amongst the highest marijuana consumers in the western world, meaning the take-up of a recreational market would be near immediate in our view,” as per the research note. Those working and investing in the space will no doubt be watching closely for Trudeau’s next move.

 
Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article.
Related reading: 
Legal Cannabis Stocks in North America
How to Invest in Medical Cannabis
Legalizing Medical Cannabis: A Look at the Laws Surrounding Medical Marijuana