Cannabis Stocks Rallied After Rescheduling News, Investment Management Firm Co-Founder Discusses Impact And Next Steps

Cannabis stocks experienced a notable surge last week following the U.S. Department of Justice’s announcement to propose the reclassification of cannabis from a Schedule I to a Schedule III drug. This decision, long anticipated by market analysts and industry stakeholders, has been described as a game-changer for cannabis companies burdened by stringent regulations and high taxes.

Canopy Growth Led The Surge

The Canadian giant Canopy Growth CGC saw its stock jump in the immediate aftermath of the announcement. The stock has climbed a staggering 115% year-to-date, significantly outpacing its peers in anticipation of regulatory changes. Tilray Brands TLRY and Aurora Cannabis ACB also enjoyed robust gains triggered by the DOJ’s proposal. While Tilray and Aurora’s stocks have since pulled back, the overall cannabis industry outlook remains bullish.

ETF’s Usual Volatility

Following the rescheduling news, Cannabis Exchange-Traded Funds (ETFs) experienced an increase, with both the AdvisorShares Trust AdvisorShares Pure US Cannabis ETF MSOS and the ETF Trust Amplify Alternative Harvest ETF MJ trading approximately 2.5% higher at the end of the week. However, the initial surge was tempered in subsequent trading sessions, with MSOS trading 0.82% lower and MJ down by 2.04% near the closing bell on Friday.

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Emily Paxhia On Market Dynamics And Regulatory Challenges

In a recent interview with Yahoo Finance, Emily Paxhia, co-founder of Poseidon Investment Management, a firm investing in promising cannabis companies, discussed the broader implications of the rescheduling. Paxhia highlighted the shift as a validation of the processes that the industry has been working through, particularly in light of President Biden’s 2022 initiative to review cannabis scheduling.

Paxhia pointed out the significant uptick in trading volumes for cannabis stocks. “Since the DEA news, we have seen increasing volumes in the top names in the industry, including, for example, Ascend Wellness Holdings AAWH is seeing more volume basically in the last few days than they have seen in the prior year,” Paxhia said. 

Addressing the ongoing challenges and potential next steps following the rescheduling, Paxhia said she anticipates that during the Dept. of Justice’s 60-day comment period, the industry might face opposition from prohibitionists using fear-mongering tactics. However, she remains optimistic about overcoming these challenges, given the strong data supporting the positive effects of cannabis legalization and regulation.

Read also: Finally, Tax Refunds! These Cannabis Companies Will Get The Most Money Back If Rescheduling Happens

As the industry awaits further developments, the focus remains on how these changes will translate into real-world benefits for cannabis companies and their stakeholders.