Sessions rumours knock marijuana stocks off their high
Cannabis stocks came down from their high on Thursday as rumours emerged that US attorney general Jeff Sessions planned to rescind federal marijuana legislation.
Sessions was reported to be gearing up to tear up a trio of memos from former President Barack Obama's administration that had allowed states that had decriminalised or legalised marijuana to avoid federal government interference over these laws, despite the sale of cannabis still being illegal under federal law.
Most notably, the Cole Memo, named after the Justice Department deputy who authored it in 2013, outlined a set of key criteria that, if adhered to, gave states the permission to implement their own laws with limited intervention as long as concerns such as youth use, impaired driving and interstate trafficking were taken into consideration.
While it was almost guaranteed that the memo would be rescinded, it was not known if Sessions intended to issue new guidance on the matter or return to a state of uncertainty regarding federal enforcement on a state level.
The news, first reported by the Associated Press, sent cannabis stocks sharply lower, as Cannabis Sativa, involved in the research, development and licensing of marijuana products, came down 22% and Colorado-based cannabis farmer GrowGeneration fell 21%.
The Horizons Marijuana Life Sciences Index HMMJ, which started trading on the Toronto stock exchange in December and tracks more than 20 marijuana-related companies in North America, dipped 7.7%, and shares of ETFMG Alternative Harvest ETF had fallen 8%.
Recently ETFMG, the first US-based marijuana exchange-traded fund, had blazed higher since being launched on Boxing Day, with investors tripping over each other to get a piece of the budding new market. The ETF exploded from a value of $5.7m on 26 December, its opening day, to $77.4m by Wednesday, just two days after marijuana was legalised in the US state of California, creating the biggest market for recreational use of the drug.
"There was obviously a lot of pent-up demand," said Sam Masucci, chief executive officer of ETF Managers Group which ran the exchange-traded fund.
"People want to play the theme and the theme is simple: the growing acceptance of marijuana," he added.
ETFMG Alternative Harvest ETF, which had rolled out only one week prior, was up 18% in just one week and its Canadian counterpart, Horizons Marijuana Life Sciences ETF, lit up 12%.
Medreleaf was 29% higher, Aurora Cannabis and Emerald Health Therapeutics blazed up 24% and 20%, respectively, and Canopy Growth, the biggest marijuana stock by market cap, gained 9.4%.
A new marijuana industry report by ArcView Market Research said, "The total economic output from legal cannabis will grow 150% from $16bn in 2017 to $40bn by 2021"
"U.S. consumer spending on legal cannabis in 2021 of $20.8 billion will generate $39.6 billion in overall economic impact, 414.000 jobs, and more than $4 billion in tax receipts," the report added.
The Cannabis Stock Index, managed by 420 Investor, hit a new all-time high on Wednesday evening, continuing a pattern that began in early November.
The Index closed the day at 180.02, an 8% uptick from the previous day's close, and a 26.7% year-to-date return.