US Markets

Pot stocks soar as U.S. House committee clears bill on federal weed legalization

Credit: REUTERS/CHRIS WATTIE

Shares of marijuana companies rose on Thursday after a U.S. congressional committee passed a legislation to decriminalize cannabis, taking it a step closer to being approved by the Democratic-controlled House of Representatives.

Nov 21 (Reuters) - Shares of marijuana companies rose on Thursday after a U.S. congressional committee passed a legislation to decriminalize cannabis, taking it a step closer to being approved by the Democratic-controlled House of Representatives.

The bill, which was passed 24 to 10 in the House Judiciary Committee on Wednesday, sent shares of Canopy Growth WEED.TO, Aurora Cannabis ACB.TO, Aphria Inc APHA.TO and Tilray Inc TLRY.O up between 8% and 15%.

"We think federal legalization would be a big positive for investor sentiment surrounding cannabis equities, which have been battered by oversupply and a steep price decline for the underlying commodity since becoming legal in Canada," said Garrett Nelson, senior equity analyst at CFRA Research.

The approval comes two months after the House passed a bill to advance legislation that would allow banks to provide services to cannabis companies in states where it is legal.

The latest bill, which has more than 50 co-sponsors, enables states to set their own policies while allowing to expunge federal marijuana convictions and arrests.

Additionally, the bill will authorize a 5% federal sales tax on marijuana products that are manufactured in or imported into the United States.

However, analysts were skeptical about the future of the bill.

"It's such an early step in a long process that there are no near-term implications for cannabis stocks. The Senate isn't likely to approve it, even if the House were to do so," said Alan Brochstein, managing partner at New Cannabis Ventures.

Shares in the sector are down more than 25% this year, according to the alternative harvest ETF MJ.P, which tracks cannabis-related stocks, taking a blow from a slow roll out of retail stores and oversupply in Canada, as well as uncertainties related to U.S. regulations.

Weed companies have been spending heavily to expand and strike partnerships in the United States, banking on more states legalizing cannabis for both recreational and medical use.

Currently, 11 U.S. states have legalized marijuana for recreational use, while 33 states have approved it for medical purposes.

(Reporting by Shanti S Nair in Bengaluru; Editing by Sweta Singh and Sriraj Kalluvila)

((ShantiS.Nair@thomsonreuters.com; +1 646 223 8780 Ext: 7208;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Commodities

Latest Markets Videos

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More