Major U.S. indexes such as the Dow Jones hit record highs yesterday as uncertainties regarding the presidential transition process seem to have abated somewhat. President Trump, who had previously vowed to contend the results of the race, confirmed on Tuesday that he would be cooperating with Biden’s team in the initial transition process. A number of stocks shot up significantly in response to the news, but some of the biggest winners have been cannabis companies.
Cannabis companies have had to deal with a variety of problems due to the federal ban on cannabis in the country, despite the growing number of states that have been legalizing either medical or recreational marijuana use. Biden ran on a platform that, on the topic of cannabis, vowed to legalize weed across the country. It’s a move that would be a game-changer for U.S. marijuana companies, who often have trouble dealing with banks and processing transactions.
The biggest winner on Tuesday was Aurora Cannabis (NYSE: ACB), which shot up as much as 28.6% in response to the news. Aurora has seen its market cap plummet over the past year and a half, as financial problems, such as excessive debt and an overabundance of goodwill on its balance sheet, ultimately sent the stock crashing. Although still relatively popular among younger investors, Aurora is still one of the most volatile pot stocks on the market.
Other companies that are up a lot include Tilray (NASDAQ: TLRY), whose shares jumped by 18.4%. HEXO (NYSE: HEXO), Canopy Growth (NYSE: CGC), and Aphria (NYSE: APHA), are all up around 10.6%, 8.3%, and 7.2%, respectively. For the most part, there’s no real news from any of these companies to justify this move besides what’s going on with the Biden transition.
However, cannabis investors that think now’s a sure time to buy in should remain a little cautious. President Trump reiterated that he is still planning to challenge the election results, but that he is willing to allow the initial transition protocols to begin as a formality. Should the matter be decided in the Supreme Court, a potential ruling in Trump’s favor would send pot stocks plummeting once more.
There’s also a big difference between U.S. and Canadian pot producers, and how a Biden presidency will effect them both. Cowen analyst Viven Azer, well known for her coverage on pot stocks, warned that there’s “no near-term U.S. catalyst” for Canadian producers looking to enter the U.S. due to interstate commerce laws. “We do not see a mechanism for a Canadian operator to enter the U.S,” she added.
Whether or not cannabis as an industry will see a return to grace in 2021 is still quite uncertain. Investors and traders should keep these concerns in mind.
Aurora Cannabis Company Profile
Aurora Cannabis Inc., headquartered in Edmonton, Canada, cultivates and sells medicinal and recreational cannabis through a portfolio of brands that include Aurora, CanniMed, MedReleaf, and San Rafael ’71. Although the company primarily operates in Canada, Aurora has expanded internationally through medical cannabis exporting agreements or cultivation facilities in more than 25 countries. – Warrior Trading News
