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Cannabis Stock Report: Marijuana Markets Falter As Canadian Legalization Delayed By Legislators

Cannabis stocks fell on Friday on the official news that Canadian legalization efforts would be delayed until at least August following federal lawmakers failure to agree to a deal that would see the legislation taken up before June, according to CBC News. Following last week’s televised presentation by Health Minister Ginette Petitpas Taylor to the Senate Canadian can now expect anywhere from eight to twelve weeks following the bill’s passage before the law goes into effect. According to expected timelines, Canadians will not see prohibition repeal until sometime in August, at the earliest.

After what was already a turbulent month for pot stocks, The North American Marijuana Index fell 8.89 points on Friday, a decline of 3.18 percent to close out the day at 270.70.

A New Timeline For Canadian Legalization

CBC News reports that negotiations between Peter Harder, point-man in the Senate for Prime Minister Justin Trudeau's, and upper house Conservative leader Larry Smith, over a final vote on Bill C-45 resulted in the new timeline, despite a year of promises that legalization would occur at or around July 1. Once the bill receives royal assent, the Trudeau government expects a lead time of two to three months will be necessary before the first sales can commence. The news is not unexpected following last week’s televised Senate hearing in which Health Minister Ginette Petitpas Taylor admitted that delays were possible.

"There's no exact date but, if you do the math, you'll see it won't be July 2018," Petitpas Taylor told reporters according to CBC News. "Cannabis legalization is not about a date, it's about a process ... We want this process done as seamlessly as possible."

Health Minister Ginette Petitpas Taylor
Health Minister Ginette Petitpas Taylor

Conservatives applauded the delay, stating they hope to use the extra time to study the effects of legalization on a national level. Opposed to the legislation from the start, Tories continue to use propaganda as a stalling tactic. The party claims they worry that prohibition repeal will increase marijuana usage among youth, lead to more impaired driving accidents, and help to fuel the black market.

"The table has been set for what we've asked for all along — a thorough examination of the bill," one source told CBC News. "There's lots in the legislation that is of concern to us." Tories plan to use the extended timeline to add a number of amendments to the bill.

Before the newly agreed upon timeline, Trudeau’s point-man on legal weed Peter Harder threatened to force a vote on the bill using rules and procedures to shut down debate. Now that the two sides are in agreement that threat is off the table.

The Industry Reacts

As Canada backpedals the cannabis industry is forced to readjust their plans, while investors and shareholders grow more and more concerned amid the uncertainty. While some work on a contingency plan, others with a little more foresight can say they saw this coming. Friday Night Inc. (CNSX:TGIF) CEO Brayden Sutton is one of those people.

Asked to comment on the recent events in Canada, Sutton, whose career has brought him all over the industry as an analyst and an executive was not surprised at the turn of events. Sutton told PotNetwork, “There are still so many obstacles to overcome. They estimate legalization in August, but it appears to me to be more like 2019.”

Asked to elaborate, he went on, “We still don't have provincial retail sorted out. Provincial distribution is nowhere near sorted out. The country has no federal drug enforcement-type agency, and the implications with Uncle Sam are massive. We share the largest unprotected border in the world with a country that still sees this as a Schedule I narcotic. That's an issue. Furthermore, treaties with the U.N. are still an issue that the Canadian people have heard nothing about. That alone could be a year-long process.”

In what is perhaps one of the boldest predictions to come from the whole situation, Sutton sees a scenario where Canada may not necessarily be the first North American country to legalize marijuana fully.

“Don't be surprised if there is some sort of positive, federal catalyst in the United States prior to Canada fully going to recreational adult-use cannabis. I think it's a strong possibility,” he told PotNetwork. To date, his predictions have all come true.

The Markets Falter

News of the delay, while not unexpected sent the marijuana markets into a slight tumble on Friday, with major indices falling across the sector. The Canadian Marijuana Index lost 31.42 points, falling 4.17 percent to close the day at 721.87. Solactive’s major indices fared no better, with the North American Marijuana Index losing 62.98 points and the Emerging Marijuana Growers Index dropping 26.88 points. The Global Cannabis Stock Index also fell on Friday, losing 4.40 points for a decline of 3.19 percent to close out the day at 133.59.

Marijuana Index
The North American Marijuana Index (c) The Marijuana Index www.marijuanaindex.com

Still, on an individual level, the losses were minimal, with no company losing more than 10 percent of their share value on Friday. MedReleaf Corp. (LEAF:CA) fell  $1.60 per share on average trading volume, and Abcann Global Corporation (ABCN:CA) lost 7 percent on lower than average trading volume. Industry stalwart Aurora Cannabis Inc. (TSX:ACB) lost $0.72 per share, a decline of 6.64 percent to close the day at $10.13 per share.

Solactive North American Marijuana Index Source:www.solactive.com
Funds across the sector fared no better, as news of Canada’s delay put a damper on the market as a whole. The ETFMG Alternative Harvest ETF (MJX) fell $0.62 per share. It was a 1.92 percent loss as the fund closed the trading day at $31.59 per share. Horizons Marijuana Life Sciences ETF (HMMJ.TO) also fell, losing 4.17 percent, while cannabis’ newest fund the Evolve Marijuana ETF (SEED:CN) lost $0.85 per share.

Meanwhile In The U.S.

U.S cannabis stocks held on with minimal losses on Friday despite the news from the north. Early day gains were pared as news of Special Prosecutor Robert Mueller’s indictment of Russian actors for interfering in the 2016 presidential election put a halt on late-day trading. Despite the political news, the broader markets returned to stability this week following last week’s market correction that had investors in a momentary panic. The Dow Jones Industrial Average rose .08 percent on Friday while the Nasdaq fell .23 percent.

The United States Marijuana Index fell 0.36 points, a loss of 0.40 percent to close the day at 89.40.

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