Cannabis Stocks Rise on Edibles Legalization Day
LEGALIZATION 2.0 COVERAGE
One year after Canada completed the federal legalization of recreational marijuana, the nation will now open its market to novelty products infused with the drug. This includes edibles such as cookies and gummies, as well as cannabis beverages, which will be introduced to the market in an attempt by legal producers to tap into a replacement product for alcohol.
As such, on the eve of the launch of this second phase of the marijuana market in Canada, the Investing News Network brings investors a collection of stories and interviews on the impact this opening will have.
Canada’s nascent legal marijuana industry has had the last year to grow based on a small sample of products, but on Thursday (October 17) legislation ushered in a new wave of consumption: cannabis-infused edible products.
Stocks across the sector saw gains on Thursday as legalization came into effect.
Many licensed producers, including Canopy Growth (NYSE:CGC,TSX:WEED), Aphria (NYSE:APHA,TSX:APHA), Aurora Cannabis (TSX:ACB) and Organigram Holdings (TSXV:OGI,OTCQX:OGRMF), saw value increases as the trading day began.
A collection of Canadian exchange-traded funds (ETFs) also saw gains as the day kicked off, including the Evolve Marijuana ETF (TSX:SEED), which rose on Thursday to C$15 shortly after the start of trading.
The Horizons Marijuana Life Science Index ETF (TSX:HMMJ), which acts as an index for a pool of cannabis stocks, jumped 3 percent from a close on Wednesday of C$10.62 to C$10.94 early in the trading day.
It’s a different story from last year, when companies in the sector took a hit on the day of initial cannabis legalization in Canada in a generally accepted selloff seen across the board.
Up until now, recreational users of cannabis in Canada only had access to dried flower and oils, but retailers will soon be able to stock their shelves with marijuana derivatives in foods, beverages and topicals, giving consumers options other than inhalation.
While the legislation is now in effect, sales won’t begin until mid-December, according to Health Canada. The federal regulator will be subjecting new products to a 60 day review period.
The beginning of the year saw sky-high valuations for cannabis companies, but the industry was put through its paces over a summer marked with volatility. It suffered from an array of setbacks, including high investor expectations for revenue generation and a lack of retail locations in the country.
However, industry experts and analysts have said edibles could prove to be a boon for the space.
A study from Lift & Co. (TSXV:LIFT,OTCQB:LFCOF) and EY estimates that 1.5 million new customers could be introduced into the market now that alternatives to smokeable products will be available.
A report from business research company Deloitte furthered excitement about the space after the firm projected this new legalization could create a C$2.7 billion industry in Canada.
Performance of Canadian extraction companies
At the core of these new products will be cannabis extracts, and companies have been amping up their extraction capabilities to prepare for the next phase of Canada’s cannabis legalization.
Extraction giant MediPharm Labs (TSX:LABS,OTCQX:MEDIF) jumped in value early on in the trading day on Thursday, opening at C$4.19 and rising 2.6 percent to C$4.30 by 10:20 a.m. EDT.
Quebec-based Neptune Wellness Solutions (NASDAQ:NEPT,TSX:NEPT) also saw some gains in Toronto, rising from a closing price on Wednesday of C$4.59 to C$4.75 at open on Thursday.
Another successful extraction firm was Valens GroWorks (TSXV:VGW,OTCQX:VGWCF), which opened at C$3.21 before reaching C$3.34 by 11:50 a.m. EDT.