Is Canada’s Marijuana the New Bitcoin? Stocks Surge After Legalization

Canada's Marijuana

July 4th, 2018

Canada gets ready to implement legal recreational marijuana later this year, the U.S. neighbor’s cannabis stocks have surged and some experts suggest marijuana could be the next Bitcoin.

“I believe the incredible tailwinds blowing at legal marijuana’s back make it so the opportunity here is much like the one internet stocks offered in 1994 … or the one bitcoin offered in 2015,” Matt McCall, founder, and president of Penn Financial Group wrote for Investor Place.

Cannabis stocks were also among Canada’s best performing last year. Canopy Growth and Aurora Cannabis are the top publicly traded marijuana companies, and those who invested in them a year ago have “easily reaped Bitcoin-like returns,” Canada’s Global News reported.

After Canada’s parliament voted to legalize recreational weed on June 19, marijuana stocks in the country immediately surged. Canopy, the nation’s largest producer, increased by 6 percent to a record high of $34.17. Arora increased by 3.8 percent and Cronos Group Inc., another marijuana company, surged 6.2 percent, Bloomberg

Marijuana activist Chris Lawson makes a speech on stage during a rally in support of legalizing marijuana on June 5, 2004, on Parliament Hill in Ottawa, Canada. After Canada’s parliament voted to legalize recreational weed on June 19, marijuana stocks in the country immediately surged. Donald Weber/Getty Images

Canada’s legal marijuana industry is already valued in the billions. The estimated worths of the top companies such as Canopy and Aurora about $6.7 billion and $3.8 billion respectively. With legalization set for October 17, most experts expect rapid growth over the next few months.

“If you missed the opportunity to make 50 times your money in internet stocks … or if you missed out on the opportunity to make 50 times your money in bitcoin, you’re going to want to know how to play weed,” McCall wrote.

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A 26-year-old Canadian engineer who plans to invest in the cannabis market, but prefers to remain anonymous due to the persistent stigma, told Newsweek that those who invested last October and November have quadrupled their money. However, right now “it’s more of ‘fear of missing out'”, he said. “There’ll probably be another spike in October [of this year] … so I’ll bet on that.”

At the same time, experts have also cautioned that some companies won’t be able to meet their commitments once cannabis is fully legalized. Some also suggest that there won’t be enough weed to go around.

“I think there are companies very well suited to back up what they’re saying, and I think there are some that are just hoping for the best,” Matt Bottomley, an analyst at Canaccord Genuity, told Bloomberg. “There are some in this market that is not going to be long-term participants.”

Bruce Linton, who leads Canopy, also predicts “there will be a massive undersupply in 2018,” according to Global News.

Allan Gregory, a professor of economics at Queen’s University, told the Canadian news outlet that he doesn’t think cannabis is “an investment product for the faint of heart.”

While stocks will surge and many companies will launch in the coming months, Gregory warned that while not “every marijuana stock is going to fall … the losers will outweigh the winners.”

Another potential risk to the Canadian marijuana market is the reaction from the U.S. While nine U.S. states have legalized cannabis for recreational use, and 30 have done so for medical purposes. It remains completely illegal under federal law.

Uruguay, the first nation to decide to legalize recreational marijuana in 2013, has felt the repercussions of this legal reality. Top U.S. banks have refused to do business with Uruguayan banks that manage money from legal cannabis sales. The banks have cited U.S. federal regulations against drug trafficking and money laundering. U.S. Attorney General Jeff Sessions also reportedly warned Canadian lawmakers prior to Ottawa’s vote. He said that legalization could cause problems for Canadians.

Although it remains unclear whether banks will take a similar stance when it comes to Canada. Hannah Hetzer, senior international policy manager at Drug Policy Alliance, believes the U.S. neighbor’s prominence could shelter it from a similar fallout.

“It really remains to be seen if U.S. banks will do the same for Canadian banks, ”Hetzer previously told Newsweek. “We might just see that U.S. banks decide to say nothing in this case,” she said. But added that “it could create an obstacle” if banks decide to take a stance against Ottawa’s new policy.
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