Feb 3, 2021 - Economy

Pot stocks boom as industry sees prohibition ending

Illustration of marijuana buds in a champagne flute

Illustration: Aïda Amer/Axios

GameStop and the "meme" stocks have attracted much of the market's attention in recent weeks, but cannabis stocks have been the market's real standout in 2021 thanks to renewed expectations of U.S. legalization.

The big picture: Many have quietly doubled their stock price in less than a month of trading.

Why it matters: Pot stocks have been volatile over the past year, but have boomed since Joe Biden was elected president and could see a run similar to 2018 following Canada's decision to fully legalize.

What's happening: Momentum has grown so strong that the chairman of a marijuana company that counts Jay Z, Rihanna and DJ Khaled as investors and just went public via the industry's largest-ever SPAC says he's "100% certain" the U.S. will see the decriminalization of marijuana in the next two years.

Where it stands: "We do believe that prohibition is essentially over," Michael Auerbach, chairman of The Parent Company, tells me on the latest Voices of Wall Street podcast.

  • "I'm 100% confident that prohibition of cannabis will end within the next 12 to 24 months and over a period of two to five years it will be regulated like alcohol and tobacco with interstate commerce and the ability to grow, manufacture, distribute, create brands and be able to ship them across state lines."

Driving the news: Earlier this week Senate Majority Leader Chuck Schumer announced a plan to roll back marijuana prohibition laws in the U.S.

What they're saying: "The War on Drugs has been a war on people — particularly people of color. Ending the federal marijuana prohibition is necessary to right the wrongs of this failed war and end decades of harm inflicted on communities of color across the country," Schumer, Sen. Ron Wyden and Sen. Cory Booker said in a joint statement announcing forthcoming legislation.

  • "We are committed to working together to put forward and advance comprehensive cannabis reform legislation that will not only turn the page on this sad chapter in American history, but also undo the devastating consequences of these discriminatory policies. The Senate will make consideration of these reforms a priority."

By the numbers: The marijuana ETF MJ rose 9.8% on Tuesday and has gained 47.9% year to date. Individual companies have seen even more impressive bounces so far this year.

  • Cannabis medical research standout Tilray's stock jumped by 23% on Tuesday and is up 184.4% year to date.
  • Cannabis medical supply company Aphria rose 18% Tuesday and has gained 114.3% since Jan. 4.
  • Cannabis production and distribution company Cronos gained 11.3%, bringing its year-to-date rise to 64.1%.

Editor's note: Article corrected to show Michael Auerbach is the chairman of a company that counts Jay Z and others as investors, not the CEO.

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