Rumours of House Republican bill legalizing cannabis
It is what the cannabis industry has been waiting for, but yesterday rumours suggested that House Republicans are expected to introduce a reform bill removing cannabis from the controlled substances act, which basically means that it will no longer be criminal on a federal level. Essentially the regulation would be more like the current regulation of alcohol. While still a rumour and an initial draft, it was enough to please investors yesterday sending our cannabis equity basket up 7.6% and 10.2% this month.
Besides the good news on the legislative side of the industry, one of the largest companies in the industry Canopy Growth reported very disappointing earnings with Q3 revenue at $131mn down 3% y/y and gross margin plunging to -54.2% from 20% in Q2 driven by an inventory write-down as consumers’ preferences changed during the quarter towards higher end products. This is a major negative for investors and the industry which is still battling with showing profitability.