Easy Come Easy Go. Cannabis company stocks like yesterday Canopy growth (NASDAQ:CGC), Tilray brands (NASDAQ:TLRY)And Cronos Group (NASDAQ:CRON) News that the U.S. Drug Enforcement Agency (DEA) has agreed to recommend downgrading marijuana from a Schedule I drug to a Schedule III drug skyrocketed. The feeling of exhilaration is already wearing off today.
As of 11:15 a.m. ET on Wednesday, Canopy Growth shares are down a shocking 25.7%, followed by losses of 17.6% for Tilray and 7% for Cronos (which I think counts as “good” news today ).
The Great Selloff in Marijuana Stocks
Why are marijuana investors panicking today? Let’s start with the obvious.
A Schedule III drug (such as ketamine, anabolic steroids, or soon marijuana) may not be as tightly regulated as a Schedule I drug (such as heroin). But it is still regulated. You can’t just stroll into a liquor store, show your ID, and pick up a pack of weed like you can when purchasing smokes or alcohol. You can’t even buy a Schedule III drug at the pharmacy CVS or Walgreens. Additionally, state-licensed marijuana dispensaries still sell a product that is illegal to sell under federal law.
The marijuana rescheduling will also impose new costs on the marijuana industry, most notably requiring the nation’s 15,000 licensed dispensaries to all register with the DEA and regularly report on their activities.
Should you buy marijuana stocks?
However, if you ask me, that is primarily The reason marijuana stocks are selling off today is because marijuana investors made a lot of money yesterday, cashing in their chips and taking profits. However, this is short-term thinking.
Reducing marijuana by two levels to a Schedule III controlled substance is truly good news for the industry and will accelerate the movement in states to ban the drug for both medical purposes (as 38 have done) and recreational purposes (as 38 have done). 24 did it). . It will also provide some tax benefits for marijuana businesses and allow the deduction of certain business expenses that could not be deducted when marijuana was a Schedule I drug. This will have a direct positive impact on cannabis companies’ bottom lines, increasing profits and making marijuana stocks appear cheaper.
At the same time, the new marijuana regulations give the federal legalization movement additional momentum. In the U.S. Senate yesterday, Majority Leader Chuck Schumer, D-N.Y., reiterated his support for passing marijuana banking reform. Furthermore, he expressed his commitment to “removal.” [marijuana] to completely get rid of “the Controlled Substances Act” – to legalize the drug once and for all.
Despite today’s selloff, shares of Canopy Growth, Tilray Brands and Cronos Group are still trading higher than they were before the DEA announcement. As profits rise and widespread legalization becomes more likely, there are good reasons for this.
Should you invest $1,000 in Canopy Growth now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health and Tilray Brands. The Motley Fool has a disclosure policy.
Why Canopy Growth, Tilray, and Cronos Group Stocks Just Cratered was originally published by The Motley Fool