Quiver Quantitative - Shares of various marijuana companies experienced a significant surge, with some spiking as much as 37% after a proposal by a U.S. health agency to reclassify marijuana as a substance of lower risk. This move kindled hopes for the plant's federal legalization. Although nearly 40 states have endorsed marijuana's use in one form or another, endeavors to gain federal approval have faced setbacks. This disjunction has deterred some investors, prompting the industry to rely on unconventional financing sources. Eight Capital's analyst, Ty Collin, noted that reclassification to Schedule III would not only rectify the taxing pattern for U.S. Multi-State Operators (MSOs) but would also represent a pivotal validation for the cannabis industry, potentially attracting institutional and strategic investors who were previously hesitant due to its Schedule I status.
Shares of marijuana corporations like Cronos Group (TSX:CRON) OrganiGram Holdings (TSX:OGI) Aurora Cannabis (TSX:ACB) Canopy Growth (TSX:WEED) saw an increment between 6% to 25%. Meanwhile, other cannabis entities like Verano Holdings, Green Thumb Industries, Cresco Labs, Curaleaf Holdings (CSE:CURA), and Goodness Growth observed a rise ranging from 15% to 37%. Following this trend, AdvisorShares Pure US Cannabis ETF, a pot stocks tracker, skyrocketed by almost 17%, and post the announcement, it culminated with a 21.2% rise, marking its most significant one-day surge since October 6, 2022.
The U.S. Department of Health and Human Services (HHS) has put forth this recommendation to the Drug Enforcement Agency (DEA). It is the DEA that wields the ultimate authority in deciding rescheduling, and as per the current situation, they are set to embark on their review process.
In light of the HHS's recommendation, anticipation for marijuana's legalization at the federal level has intensified, reflecting in the stock market upswings. It signifies a potential shift in the cannabis industry's perception and can redefine the future scope and expansion of the sector, contingent on the DEA's forthcoming decision.
This article was originally published on Quiver Quantitative