We have previously here at Askbrokers.com covered the Cannabis market, the parabolic rally and potential m&a situations to come. A Good part of this rally/m&a bonanza stems from the fact that President Trump appeared to be positive Cannabis and states’ rights to legalize it as they please.
As can be noted by this comment from President Trump earlier this year in June mentioned in Forbes Magazine.
Talk of President Trump’s potential support picked up steam in early June when he stated that he would “probably” support the STATES Act, a new bipartisan bill introduced by Sens. Cory Gardner (R-CO) and Elizabeth Warren (D-MA) that would exempt legal state-licensed cannabis businesses from the Controlled Substances Act, eliminating the fear of federal prosecution, as well as banking and tax issues that currently plague the industry.
But this isn’t new ground for the current president. During the 2016 campaign, in an interview with KUSA-TV in Colorado, Donald Trump was asked if his administration would crack down on cannabis businesses operating in compliance with state laws. His response: “I wouldn’t do that, no … I think it should be up to the states, absolutely.”
It looks like though that the Trump Administration has turned negative on the legalization of Cannabis as Buzzfeed news reports.
The White House has secretly amassed a committee of federal agencies from across the government to combat public support for marijuana and cast state legalization measures in a negative light, while attempting to portray the drug as a national threat, according to interviews with agency staff and documents obtained by BuzzFeed News.
It reports that The Marijuana Policy Coordination Committee have been formed and it had told 14 various federal agencies and Drug Enforcement Administration (DEA) to submit to them only negative data-points about Cannabis and Marijuana.
This stance is more in line with Attorney General Sessions, who has consistently advocated towards more strict federal regulation and implementation when it comes to Cannabis and Marijuana.
This negative news can stall and potentially reverse the parabolic rally various Cannabis stocks have had recently. In addition as various investors are looking further into the space, trying to “weed out” the potential less serious companies.
Famed short-seller Andrew Left and his Citron Research just recently came out with negative note on Cronos (CRON US), noting that there might be issues with sizes of the company’s distribution agreements. Citron writes:
Cronos management appears to have been deceiving the investing public by purposely not disclosing the size of its distribution agreements with provinces – unlike every other major cannabis player.
Our sources have informed us that it’s because the agreements are so small they could never justify the premium investors are paying for the stock.
Some may argue that US listed cannabis stocks are subject to stricter regulation so companies are much more careful with what they disclose but both Canopy Growth (NYSE:CGC) and Tilray (NASDAQ:TLRY) are much more forthright.”
As can be seen above Cronos (CRON US) share price dropped over 30% post the release of the note. This is an illustration of how the Cannabis space is very volatile, and all stocks move violently on all types of news. As a trader in the space it is important to diligently follow the news, both on macro, political and company specific levels.