Today was the second of three readings of Canada’s marijuana legalization bill C-45. The approval of the bill moves Canada one step closer to becoming the first country to legalize recreational marijuana nationwide.
Is Marijuana Legal in Canada Yet? 3 More Steps on the Road to Full Marijuana Legalization
- Senators who don’t like the bill in its current form will try to make changes up until the final reading on June 7, 2018.
- If the bill is amended in the senate it then goes back to the House of Commons for the changes to be approved and must be sent back to the Senate for the final reading and vote by June 7. In the last 100 years the Senate has only voted against one bill approved by the House of Commons, so it’s highly likely the bill will pass the third and final reading with no problems.
- With the third reading and vote complete, the bill will move to receive royal assent, which just means the Queen of England’s designate, the Governor General of Canada, must approve the bill. After receiving final approval the bill becomes law. The vote by the Governor General is largely a formality and the bill is assured to pass at this point.
How a Bill Becomes Law in Canada
If Legalization is Delayed What Does it Mean for Stocks?
The best way to think about the impact legalization will have on stock prices is that any delay just pushes off the profits producers will make from selling to the general public.
Because cash in your pocket today is worth more to you than a payment a year from now (time value of money), the stocks are worth less the longer we wait for recreational sales to begin.
If the target price is $10 and the bill is delayed a month, the stock should now be worth $9.90/sh.
Outlook for the Next 6 Months for Marijuana Stocks
Price action in marijuana stocks was mixed after the vote showing that a lot of positive sentiment is already priced in (Cronos up 10% while larger players flat or down).
As legalization nears we could see marijuana stocks grind higher, driven by positive political momentum, capacity announcements and a legal supply shortage in the early days. Risks abound by year-end, however, with dozens of massive greenhouses starting production in 2019.
Grizzle expects an oversupply of marijuana will push down retail prices and take the producer stocks down with it. Be vigilant.