Will Recommendations From The Marijuana Task Force Impact Marijuana Stock Prices?

It has been an absolutely crazy 2016 for the marijuana industry in Canada. As the big stock price increases began to build after Canopy Growth Corp. (TSE:CGC) graduated from the TSX Venture exchange to Canada’s senior exchange back in July, investors began piling in with anticipation that the recreational pot market would open up in the spring of 2017...One of the biggest risks to the entire industry and the realization of its potential, however, was the implementation timeline, and investors didn’t see the larger implications they were dealing with. This article explores the risks as we see them.

Written by SmallCapPower.com

Anticipating that legislation is tabled in the spring of 2017, given the release of the Marijuana Task Force report, does not mean that marijuana will be legalized then as the Bill has to go through our democratic system and gain royal assent before being passed into law...The government is giving itself until late 2018, early 2019 to open up the market for recreational marijuana.

As one of the major pushes for the legalization of marijuana in Canada is the elimination of the black market in this country, the Task Force’s recommendation on the age of access being 18 has prompted kick back from various political leaders and will make the process of finalizing legislation much harder. That being said there were still a number of positive revelations from the report that will help the prospects of the companies currently producing under the Access to Cannabis for Medical Purposes Regulation (ACMPR).

• As the Task Force has suggested that the production of recreational marijuana be subject to the same standards that the medical marijuana industry is subject to, it puts current licensed producers at a huge advantage.
• Also, the recommendation that marijuana not be sold in the same areas as alcohol or cigarettes, puts a damper on Premier Kathleen Wynne’s plans to have the LCBO become the main distributor. Regardless of the fact that most Ontarians are relieved at this, it benefits the producers in the industry to not have one sole purchaser/ distributor, as then they set the price at which they buy, and this also benefits job creation as new store fronts will need to be opened up to service this industry.

This optimism was reflected in the stock value of many players on December 13^th when the report was released:

• Aurora Cannabis (TSXV: ACB) jumped 6.5%,
• Aphria (TSXV: APH) moved up 6%,
• And Canopy Growth Corp. (TSE:CGC) gained almost 8%.
• Furthermore, with the importance that the Task Force put on preventing driving while impaired by marijuana sent shares of Cannabix Technologies Inc. (CSE:BLO), a company developing a marijuana breathalyzer, 6% higher...

What’s Next for the Marijuana Industry?

Now that the Task Force has completed its review and submitted its recommendations, what’s next? We know legislation isn’t expected to be submitted for another 4 or 5 months, so what will happen to the industry in the meantime?...

With the recreational market not expected to come online until early 2019, it leaves a long time before some of these companies’ sales will be able to justify their valuations. Yes, as announcements are made, you will see sentiment push valuations up and down, but if you try and capitalize on those you’re not investing, you’re speculating. We believe that the marijuana stock sector, for the most part, will sit idle as prices will average around these levels, or drop until at least next spring when the next rush of investor sentiment is created with the tabling of new legislation....

The only place that could still be in for some movement is the peripheral market surrounding the industry, such as breakthrough technologies that will help increase yields/ reduce growing times, or help with the detection of marijuana for law enforcement. With the detection of marijuana in real time being a huge concern for the Task Force and the law makers moving forward, you can surmise that the development of such a device will certainly help the process, and alleviate some concerns.