Cannabis stocks fail to “surge” on Recreational Marijuana legalization news
Cronos Group Inc. (CVE:MJN) shares tacked on a 13.4 percent gain in active trading yesterday, with just over 1 million shares trading hands, while Canopy Growth Corp (TSE:WEED) rose by 11.1 percent to close at $10.98 a share on. volume of 5.7 mission shares and Aphria Inc. (TSE:APH) added $0.08 to close the day at $6.35 on volume of 1.9 million shares.
On Sunday, the Canadian government issued a statement through its official news agency, the CBC, indicating that an announcement will be made on April 10th, 2017, that will confirm the legalization of marijuana for all purposes (recreational, medical, cultural, etc) by July 1st 2018.
Cananbis stocks on Monday, however, were largely unmoved by the news, with Aurora Cannabis, Aphria and Canopy Growth Corp trading slightly higher but consistent with normal daily market price fluctuations (despite the sensational and inaccurate reporting by Financial Post, who claimed the cannabis stocks were ‘on fire’.)
Bloomberg Canada also exaggerated the impact of the news by reporting bombastically that “Canada Pot Stocks Surge After Report of Legalization Date”.
They opened mildly higher on lots of volume, but for the most part, every buyer was met with an eager seller, with Cronos Group turning in the best performance by percentage gain. (Not Aurora Cannabis, as reported by the Financial Post.)
Anyone who was expecting this news to spark a real fire that would make the stocks surge with the same forcefulness of November 16, 2016, was sorely disappointed.
Canadian regulators interfering with free marketplace
When the first announcement by the Canadian government Task Force on The Cannabis Legalization and Regulation that they had completed their Framework for the Legalization and Regulation of Cannais in Canada document in mid-November last year, publicly traded marijuana companies who were ACMPR licensed to grow and supply medical marijuana experienced a real and sustained market surge that was only stopped when the Investment Industry Regulatory Organization of Canada (IIROC) who oversees markets and trading, stepped in and halted trading.
It is unfortunate that such is the case, but in Canada, markets are not free to reflect demand, and irrational exuberance can be counted to be met with an intervention by the paternally minded forces that be who evidently feel themselves better suited to regulating investment sentiment than the free market forces.
It is likely for this reason, more than any other factor, that the international tidal wave of investment that should be, and most likely, would be pouring into the Canadian Cannabis sector now, is instead staying out of the market. Who wants the reward for risk taking limited by government interference?