Cannabis Act Not Quite a Done Deal for Investors

When exactly is the legalization of cannabis set to officially take place in Canada? A Senate committee is asking to take an extra year to finetune the actual bill legalizing the drug, but the Canadian leader disagrees.

In that regard, as cannabis investors eagerly await legalization, the Investing News Network (INN) takes a closer look at the current dispute for the implementation of Bill C-45.

Firstly, Bill C-45 faced the recommendation of the Senate’s Aboriginal peoples committee, asking for a delay up to one year for the implementation of the bill in early May.

On the delay and recommendations the CBC wrote:

The committee said the government should take the extra time to make certain “culturally sensitive” materials are available to warn Indigenous peoples about the risks of consuming cannabis, and to negotiate a revenue-sharing deal with First Nations governments to ensure they get a cut of the millions of dollars expected to be collected in excise taxes on the drug.

The senators also recommended the federal government set aside 20 percent of all licenses for cannabis producers for Indigenous peoples so they can pursue business ventures.

The third reading for Bill C-45 is scheduled to take place on June 7. Despite these calls for delays, months away from the expectation of recreational sales, the Canadian government has said it met with Indigenous peoples and considered the issues of these communities.

Speaking to reporters, Prime Minister Justin Trudeau said last week his government is moving forward with the legalization of cannabis this summer despite the suggested delay.

“Obviously, as I’ve said many times, this is not an event, this is a process, and we will continue to work with our partners in the municipalities, in provinces and Indigenous leadership in communities to make sure we’re doing this right and moving forward in a responsible way.”

In February Health Minister Ginette Petitpas Taylor said the federal government will require eight to 12 weeks to fully implement the new legislation across the country.

An analyst’s take on the bill’s process

“There is a growing voice in the Senate to try to torpedo this bill, I don’t know if it has enough legs to do it,” Jason Zandberg, cannabis analyst with PI Financial told INN.

Zandberg expects the bill to pass through third reading and most of the investors he speaks to on an everyday basis expect it as well.

“If I were to give it a percentage I would say 80 or 90 percent chance it is going to pass but that 10 to 20 percent is can change in a hurry,” Zandberg said. His personal prediction for the start of recreational sales is September 1, 2018.

Investor takeaway

While investors of the cannabis space would rather move ahead with a legalized market and take the Senate deliberations as a done deal, any roadblocks to the actual cannabis bill could cause delays on recreational sales and a better review of all cannabis licensed producers (LP) by analysts.

“I always get worried when I talk to an investor and they sort of casually say ‘oh yeah it’s a done deal,’” Zandberg told INN. “Because quite clearly when politics are in play and these are votes that are out of our control I’m always worried.”

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.