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Canopy Growth (CGC) exemplified the classic trading mantra "buy the rumor, sell the news" in dramatic fashion this week. Reports of an impending executive order from President Trump to expedite the rescheduling of marijuana from Schedule I to Schedule III fueled massive speculation.

Over the past few days, CGC shares surged as much as 110% on anticipation alone. The stock rocketed another 24% in morning trading when sources indicated the order would be signed today. However, once President Trump actually signed the directive – directing the Attorney General to fast-track the reclassification process – reality set in. Investors dumped shares rapidly, sending CGC tumbling to close down 12%.

Despite the sharp reversal, the stock still holds impressive gains of around 50% from pre-rumor levels, highlighting how profit-taking dominated after the headline event.

Why Profit-Taking Was Rational

It was entirely reasonable for investors to lock in gains rather than hold through uncertainty. While rescheduling marijuana to Schedule III represents a major long-term positive – acknowledging cannabis's medical utility, easing research barriers, and potentially granting tax relief under IRS Section 280E – the immediate effects are minimal.

The executive order merely accelerates an ongoing rulemaking process at the DEA, which involves public comment periods, reviews, and final publication. Experts estimate this could take 12 to 18 months, meaning cannabis companies like Canopy Growth will continue operating under current restrictive federal conditions in the near term.

No sudden flood of institutional capital or operational windfalls will materialize overnight. Banks remain cautious, and full federal alignment with state-legal markets is still in the future. For CGC specifically, fundamentals remain challenged during this waiting period.

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Canopy Growth's Ongoing Challenges

Canopy Growth faces a mix of internal and external headwinds that temper enthusiasm, even with improved sector tailwinds. Internally, the company has grappled with high debt loads from past aggressive expansions, repeated restructuring efforts, and inconsistent profitability.

Recent quarters have shown revenue stagnation or declines in key Canadian markets, exacerbated by cost-cutting measures and asset sales to shore up the balance sheet. Leadership transitions and strategic pivots – such as focusing on U.S. hemp-derived options through Canopy USA – have yet to deliver any sustained turnaround momentum.

Externally, intense competition in mature markets like Canada has led to price compression and oversupply. Illicit markets continue to undercut legal sales, while slow progress in major U.S. opportunities leaves CGC reliant on international and domestic segments that lack explosive growth.

Regulatory hurdles also remain prominent, and consumer shifts toward value products pressure margins. These factors explain why CGC's business appears weak relative to the hype, justifying caution despite progress on policy.

Bottom Line

Canopy Growth was not alone in its post-signing plunge; the broader cannabis sector mirrored the move, with Tilray Brands (TLRY) dropping 4.2% and Aurora Cannabis (ACB) falling 3.4% on the day. All have ended close to where they started from.

The executive order undeniably enhances the long-term investment case for U.S.-exposed cannabis stocks by signaling federal acknowledgment of medical benefits and a reduced risk profile.

However, with the rescheduling timeline stretched out, investors have ample time to evaluate fundamentals and identify the strongest players poised to benefit – whether through efficient operations, U.S. market access, or innovation in medical applications. Patience, not panic, will reward those waiting for concrete implementation plans.

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