April 20 (4/20) has long been the most celebrated day of the year in the cannabis industry. But it’s possible that the industry could have a lot to celebrate this year on Nov. 3 — Election Day in the U.S. However, there’s also the potential for the cannabis industry to be disappointed…
Democratic presidential nominee Joe Biden hasn’t been supportive of marijuana legalization in the past. But if he’s elected in November, it could be one of the most pivotal milestones toward legalizing pot yet. A task force formed by Biden and Sen. Bernie Sanders supported the federal legalization of medical cannabis and allowing states to make their own decisions about recreational marijuana. Assuming a President Biden adopts these causes, the U.S. cannabis industry could be changed forever.
So will marijuana stocks soar if Biden wins and sink if he loses? The answer isn’t as clearcut as you might think.
A Biden boom?
It’s important to remember that any U.S. president is relatively limited in what he or she can change alone. Efforts by a potential Biden administration could be hampered by GOP control of the U.S. House of Representatives or the Senate. Let’s assume, though, that Democrats gain control of the White House and both legislative chambers in November.
Would marijuana stocks soar in this scenario? Almost certainly. I suspect that we’ll see the biggest gains for U.S.-based cannabis operators. Green Thumb Industries (OTC:GTBIF), for example, ranks as one of the largest multi-state cannabis operators. The Illinois-based company has achieved tremendous success, but its valuation isn’t as high as it likely would be if federal marijuana laws were changed.
Canadian pot stocks would also jump with a Biden win accompanied by a Democratic sweep of the House and Senate. The biggest winners would be the stocks of companies that have a quick path to enter the U.S. market. Canopy Growth (NYSE:CGC) stands out as the obvious frontrunner with its deal to acquire U.S.-based Acreage Holdings when federally permissible.
But what if Biden wins but Republicans hold onto their Senate majority? It’s possible that cannabis stocks could bounce somewhat. However, the gains probably would be much smaller than they would be in the Democratic wave scenario.
…or a Biden bummer?
Recent national polls and polls in key swing states appear to give Joe Biden a lead in the presidential race right now. However, the betting markets favor a Biden win by a relatively narrow margin. There’s a not-so-insignificant chance that the Democratic nominee will lose in November.
How would a Biden loss impact marijuana stocks? Many stocks would probably be hit pretty hard. I suspect that Canopy Growth would rank among the biggest losers. The company is anxiously awaiting the opportunity to enter the U.S. cannabis market. If Joe Biden fails in his presidential bid, that opportunity could be a lot farther down the road than Canopy would like.
Again, though, the extent of the negative impact would depend on which party controls Congress. It’s possible that progress could be made toward reforming marijuana laws with President Trump serving four more years with a Democratic House and Senate.
There’s even an argument that some companies in the cannabis industry might…
Continue reading at THE MOTLEY FOOL