Cannabis stocks drop following Bill C-45 passing senate

(The Telegraph)

Medical marijuana company stocks like Aphria, Aurora and Canopy are all moving following the news that the recreational marijuana bill has passed the Senate.

Just not in the direction investors likely expected.

On Thursday night, the Senate approved Bill C-45 with a vote of 56 to 30 with one abstention. The Senate had proposed 34 changes previously, but despite concerns about those changes delaying the bill, it passed the third reading well before Parliament breaks for the summer on June 22.

Cam Battley, Chief Corporate Officer of Aurora Cannabis, said on a virtual investor call on Thursday that it was a “big day” for Canadian cannabis seeing the passing of Bill C-45, but he isn’t concerned if implementation of the legislation takes longer than the anticipated September 2018 timeframe.

“Some companies have gambled pretty heavily [on the legalization of the recreational market in Canada,” said Battley, but he added that it “doesn’t really effect [Aphria]” due to the broad distribution companies the company has, notably in European markets and through its medical sales.

Shortly after market open, many of the major cannabis producers listed in Canada saw their stocks slightly lower — not unusual for the highly volatile industry, but surprising in light of the positive progress towards recreational legalization. Marijuana stock subreddit r/weedstocks, a community of investors specializing in the cannabis market, seemed confident late Thursday that the move would result in big gains for the three biggest cannabis companies trading in Canada, but so far, that doesn’t seem to be the case.

Aurora Cannabis (ACB.TO)

Aurora Cannabis stock performance June 8, 2018

Despite dropping more than five per cent since open, if Battley’s comments are anything to go on, the company isn’t worried about minor fluctuations in the short term. On the investor call, Battley painted a picture of investors thinking too small if they’re just focused on the Canadian recreational market.

He said that the global medical marijuana market could reach as high as $180 billion, a fact that “not everyone has fully appreciated.” According to a report from Grizzle, Canada will be oversupplied for demand by about 850,000 kg by the end of 2021, based on current production capacity expansion, meaning global buyers of Canadian cannabis will be integral for Canadian producers.

Aphria Inc. (APH.TO)

Aphria Inc. stock performance June 8, 2018

The stock was down nearly four per cent in the first hour of the market open, but regained some ground after noon. In the last year, the stock price has dropped 30 per cent overall, so a small dip isn’t massive, but may be enough to open up the investment to new investors.

Canopy Growth (WEED.TO)

Canopy Growth stock performance June 8, 2018

The marijuana producer is down more than four per cent at the time of writing, seeing the greatest dollar-value decline of the three companies. Analyst Julian Lin at Seeking Alpha predicts that long term, Canopy Growth will see some strong growth with the legalization of recreation marijuana in Canada.

“CGC [Canopy Growth Corp.] is a compelling play on recreational marijuana in Canada,” writes Lin. “While there is no such thing as a sure thing (and surely not with CGC), the potential here is real, and if anybody will succeed in this space, it very well may be CGC.

Shares are a speculative buy, and I have gone long by selling puts. Becoming an investor in CGC requires opening your eyes to see a potentially blossoming bud.”

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