Canadian marijuana stocks soar following California legalization

Already setting new record highs for months, shares of Canadian marijuana stocks have reached lofty new territories after California voted to legalize marijuana.

On Tuesday, while many were mulling the shocking surge to the White House by Donald Trump, the state of California passed Proposition 64, which will allow residents 21 years and older to buy and possess up to one ounce of cannabis for recreational purposes and to grow up to six marijuana plants for personal use. The new measure will create an environment for state-licensed businesses to set up retail marijuana sales. With a proposed 15 per cent sales tax, the state is expected to take in an added $1 billion in tax revenue from legalization.

“We are very excited that citizens of California voted to end the failed policy of marijuana prohibition,” said Nate Bradley, executive director of the California Cannabis Industry Association, in conversation with the Los Angeles Times. “Proposition 64 will allow California to take its rightful place as the center of cannabis innovation, research and development.”

Shares of some of Canada’s best known medical cannabis stocks have made serious gains since the election. On November 4, shares of Mettrum Health (Mettrum Health Stock Quote, Chart, News: TSXV:MT) closed down ten cents to $3.82. Today, the stock closed up more than 18 per cent to an all-time high of $4.90.

And Canopy Growth (Canopy Growth Corp. Stock Quote, Chart, News: TSX:CGC), another nascent bellwether in the sector, today closed up 9.5 per cent to $9.08, one more all-time high for a stock that experiences them routinely. Shares of Canopy were trading at just $6.89 on November 4.

Shares of Aphria (Aphria Stock Quote, Chart, News: TSXV:APH) also closed today an an all-time high. The Licensed Producer’s Thursday closing price of $4.58 was up 14.8 per cent over Thursday’s close. Shares of OrganiGram Holdings (OrganiGram Holdings Stock Quote, Chart, News: TSXV:OGI) were up 7.9 per cent to $2.74 today, not an all-time high for the stock, but well off the pre-election price of $2.41 the stock closed at on November 4.

One expert says Canadian companies have a first-mover advantage that could prove lucrative as international markets open up.

“I think you’ll see Canadian companies jump at the opportunity to expand their operations and brands into the United States,” says Brendan Kennedy, the president of privately-held LP Tilray. “That could mean everything from participating in the production process to providing consulting services or licensing intellectual property to U.S. producers. There are huge opportunities for Canadian companies, because Canada has the most robust and tightly regulated medical cannabis framework in the world. Both governments and companies around the world are looking to Canada to provide leadership and expertise in this industry.”

Under Canada’s new MMPR (Marihuana for Medical Purposes Regulations) there have been 34 licenses awarded to grow and/or sell marijuana and 22 licenses to sell cannabis oil. Pacific International (PI) Securities analyst Jason Zandberg believes that in 2019, which he estimates to be the first user after recreational use is permitted, the medical marijuana market will be worth $4.6-billion. The analyst expects this will grow 10 per cent annually, reaching $7.4-billion within the first five years, with a roughly even split between medicinal and recreational users.