Jeff Sessions Ignites Marijuana Stock Selloff But Fuels Canadian Cannabis Long Term

Photo Credit: Andrew Harrer

Marijuana stocks and exchange-traded funds were on fire in the New Year until Attorney General Jeff Sessions ignited a selloff Thursday upon announcing that he’s retracting the Cole Memo, which lets individual states legalize cannabis without fear federal prosecutors will go after companies for trafficking.

Cannabics Pharmaceuticals, Medical Marijuana, United Cannabis, GreenGro Technologies, MassRoots and mCig crashed 25% to 30% each after flying high the two sessions prior as California’s new marijuana laws went into effect. ETFMG Alternative Harvest ETF plunged 6%. Its Canadian counterpart, Horizons Marijuana Life Sciences Index ETF, dropped 8%. It trades over the counter in the U.S. under the ticker HMLSF.

Investors can(nabis) relax. In every crisis, there is an opportunity. Sessions’ crackdown on legal marijuana in the U.S. will fuel Canadian marijuana companies, in the long run, industry leaders say. Value investors got the pullback they needed to buy on dips.

Boon for Canadian Cannabis

Canada intends to fully legalize marijuana by July 2018. Sessions’ move carries the unintended consequences of making marijuana stock investors favor Canadian companies at the expense of U.S. names, says John Arbuthnot,  CEO of Delta 9 Cannabis in Winnipeg.

“There is a real fear about investing in U.S.-based cannabis companies at a time when it is possible people connected with those companies could be prosecuted under federal drug laws,” Arbuthnot said in a statement. “There is a demonstrated interest among investors globally to invest in cannabis companies, which is only logical given the rapid growth of this industry.

“But right now, due to the stated U.S. policy, Canadian companies remain the only safe haven for cannabis investors.

“Canada is already, without question, the global leader in the legal cannabis industry, and this is due largely to our own federal government’s support of sensible legalization policy,” Arbuthnot added. “That support is allowing companies to expand both in Canada and now throughout the world, whereas American companies are being held back.”

Canadian cannabis companies are treated like any other Canuck business and have the freedom to grow overseas without any threat of U.S. competition. Canadian marijuana companies have legal access to crop insurance, bank loans, tax write-offs and licenses to export and expand overseas. Whereas U.S. marijuana companies don’t because the drug is illegal under federal law.