Marijuana stocks skyrocketed Wednesday after a triple hit of bullish news stemming from Tuesday's election results.
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Three states voted to legalize cannabis while the Democrats regained House control. Finally, Attorney General Jeff Sessions, a major opponent of marijuana legalization, resigned. Tilray (TLRY), Canopy Growth (CGC), Cronos Group (CRON) and other cannabis stocks rallied, with most of the gains coming on Sessions' exit.
Sessions Resignation Big Boost For Marijuana Industry
Sessions resigned Wednesday "at the request" of President Donald Trump, he wrote in a letter. With election results leaving Republicans with an expanded Senate majority, Trump can expect to confirm a new attorney general with relatively little trouble. Trump had long chafed at Sessions over the Robert Mueller Russia investigation. But it also has big implications for the cannabis industry: Sessions was a fierce opponent of marijuana legalization. The next attorney general could be more amenable to easier oversight.
Marijuana Legalization Expands To 33 States
Voters in Michigan on Tuesday approved recreational marijuana legalization in their state. The vote, when certified, will make Michigan the 10th state to permit recreational marijuana use. Missouri and Utah voted to legalize medical marijuana. In total, 33 U.S. states have now legalized marijuana in some form. North Dakotans, however, voted against a measure that would allow recreational weed.
Analysts say the legalization vote in Michigan could create a marijuana market that ultimately exceeds $1 billion. Robert Fagan, an analyst at GMP Securities, said Democratic control of the House represented a "fundamental shift in the U.S. legislative landscape which could usher in a period of positive cannabis reforms."
He noted that Democrats will control the House Rules Committee, which had blocked cannabis reform bills under the leadership of Pete Sessions, an anti-pot Texas Republican who lost his re-election bid.
Still, Fagan said, the GOP's ability to retain control of the Senate could represent a hurdle to more pot-friendly legislation.
Marijuana Stocks Rise
Among U.S.-listed marijuana stocks, Canadian marijuana producer Canopy Growth stock rose 8.2% in the stock market today, Tilray stock jumped 31%, and Cronos Group stock was up 8.4%. As for the more-recent U.S. listings, Aurora Cannabis (ACB) gained 9.2%, and Aphria (APHA) added 3.9%.
Among marijuana stocks listed in Canada, shares of Curaleaf fell 1.3% on the Canadian Securities Exchange, where the stock began trading last month. Green Thumb raced 5% higher. MedMen, another U.S. cannabis producer that went public in Canada this year, got a 5% boost.
Illinois Next After Midterm Elections?
U.S. cannabis companies like Curaleaf, MedMen and Green Thumb Industries could be winners.
Fagan said that Green Thumb and Curaleaf are the marijuana stocks that stand to gain the most from the midterm elections. He noted that recreational legalization was "highly likely" in Illinois following Democrat J.B. Pritzker's win in that state's governor race. Medical marijuana is already legal in Illinois.
Other analysts generally saw Tuesday's midterm elections as a positive for the industry.
"Beyond general pro-cannabis leanings, a Democrat-controlled House could grease the wheels for the STATES Act, and motivate House Republicans to compromise on the Farm Bill during the lame duck session," Canaccord Genuity analyst Bobby Burleson said in a research note on Wednesday.
The STATES Act would keep the U.S. government from interfering with states' marijuana policies. The 2018 Farm Bill, which lawmakers are still trying to finalize, could loosen restrictions on industrial hemp.
Burleson said Illinois had the potential to be a "meaningful" recreational pot market.
In Nevada, where recreational cannabis is already legal, he noted that Steve Sisolak — who will be the state's first Democratic governor in more than 20 years — could help business for companies like MedMen and 1933 Industries, which does a lot of business in Las Vegas.
MedMen last month said that the highest foot traffic at its dispensaries could come from Las Vegas. Burleson also noted that MedMen's PharmaCann acquisition gives it access to Michigan.
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