Cannabis stocks shot to record gains Thursday after President Joe Biden formally sought to review how marijuana is classified under federal law, a change that pot producers in the U.S. and Canada have long sought after months of stalled federal reform that soured enthusiasm in the industry.
“Marijuana-related stocks such as Tilray, and Canopy Growth soared on the news as the broader market fell,” Capital Alpha Partners analyst Ian Katz wrote in a note Thursday. “But if investors were betting that Biden’s action will lead to legalization of marijuana, they will likely be disappointed.” “There are thousands of people who were previously convicted of simple possession who may be denied employment, housing, or educational opportunities as a result,” he continued.
Exchange-traded funds focused on the marijuana industry reflected record gains after stocks reacted to the news. The AdvisorShares Pure US Cannabis ETF MSOS, +34.00% rose 34%; the ETF, which focuses on the U.S. pot industry, had never previously gained more than 9.5% in a single session, according to FactSet. The ETFMG Alternative Harvest ETF MJ, +19.55% increased 19.6%, topping its previous record for daily percentage gain of 14.9%.
Meanwhile, onerous taxes and weed regulations in legal states have crimped profits and constrained access to traditional banking services, leaving much of the industry running on cash. The SAFE Banking Act, a measure that would open up financial services to cannabis companies, has passed the House several times, but it’s never come to a vote in the Senate.
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