Sep 27, 2019

The SAFE Act's House passage isn't enough to rescue flailing pot stocks

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Data: Investing.com; Chart: Axios Visuals

Marijuana advocates scored a big win Thursday with the passage of the SAFE Act through the U.S. House of Representatives, but the market was less enthusiastic.

What it means: The Secure and Fair Enforcement Banking Act would allow marijuana companies to more easily do business with federally insured banks in the U.S.

What happened: Marijuana stocks initially soared in after-hours trading Wednesday, with Aurora Cannabis gaining more than 5% and Canopy Growth jumping 4%, but those gains were short-lived.

  • Canopy Growth's stock rose a paltry 0.42% on Thursday, while Aurora Cannabis' stock fell 0.24%, as the bill's fate in the Senate and a signature from President Trump looked uncertain.

The big picture: Matt Hawkins, managing principal at Cresco Capital Partners, told Fortune yesterday he expects to see a “heavy influx” of cannabis-related IPO registrations on the Nasdaq and NYSE because the bill would further solidify the viability of the U.S. marijuana industry.

  • It raised nearly $13.8 billion in financing in 2018, according to industry advisory firm Viridian Capital Advisors, Fortune reported.
  • Most investments stemmed from legalization in Canada and legislative changes at the state level in the U.S., which gave investors more confidence in backing pot companies.

Reality check: Pot stocks are in need of some good news. It's been almost all downhill since March after a world-beating rally to start the year.

  • A popular marijuana industry ETF, ETFMG Alternative Harvest (MJ), is down more than 10% year to date and has fallen 30% this quarter.

Go deeper: Revenue from marijuana vaping products dips 15% amid health fears

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The high times may have passed for marijuana stocks

A marijuana growth facility in Maryland. Photo: Michael Robinson Chavez/The Washington Post/Getty Images

Marijuana stocks have fallen hard in 2019 and short sellers have been increasing their positions, betting the sector is overvalued and primed for further losses. Despite the passage of the SAFE Act through the House last week, Wall Street remains bearish on companies dealing in the drug.

The latest: Bank of America Merrill Lynch analysts Christopher Carey and Lisa Lewandowski downgraded Canada's Canopy Growth, the world's largest marijuana company, to neutral from buy, saying Wall Street expectations are "far too high."

Go deeperArrowOct 1, 2019

Bernie Sanders debuts plan at 4:20 pm to legalize marijuana

Photo: Bastiaan Slabbers/NurPhoto via Getty Images

2020 presidential candidate Sen. Bernie Sanders (I-Vt.) released a proposal precisely at 4:20 pm on Thursday to legalize marijuana at the federal level, per a campaign email.

The big picture: Marijuana legalization has become an increasingly popular stance within the Democratic Party, but Sanders' proposal appears to be one of the most progressive in the 2020 field. Sanders says he would legalize marijuana within 100 days via executive action and fight against large marijuana companies monopolizing the market to ensure communities of color are able to benefit from the industry.

Go deeperArrowOct 24, 2019

Welcome to Marijuana 2.0

Illustration: Aïda Amer/Axios

The cannabis industry is poised to undergo another major change as Colorado's House Bill 1090 takes effect next month, providing investment opportunities for publicly traded companies, venture capitalists and private equity firms, which were previously barred.

Why it matters: The law will push cannabis into a new phase of development and foster considerable consolidation in the industry, creating new businesses and driving out others.

Go deeperArrowOct 8, 2019