Smoke and Mirrors in the Market:
Prince of Pot Being Popped at Pearson En Route to Pot Festival Appears to Prompt Pot Stocks
Marijuana stock prices went on something of a roller coaster ride last week. In Canada it looks as if a combination of factors drove down valuations. To begin with, two class action law suits were filed against licensed medical marijuana producers, Mettrum Ltd., and OrganiGram Inc. which may have driven down the market. The two companies shipped product that contained toxic pesticide residues.
Pot stock prices revived when Marc Emery’s Cannabis Culture “dispensaries” in Ottawa, Toronto, Hamilton and Vancouver were raided and The Prince or Pot himself, Marc Emery and his wife Jodie, presumably the Princess of Pot were arrested at Pearson International Airport as they were on their way to a marijuana festival in Spain.
The smart money has argued that pot stocks fell back because they had been oversold. Investors have been figuring in the profits that will flow when legalization takes place and the doors to a much wider market opened. Bill Blair, the former police chief who is Ottawa’s point man on legalization recently said that a marijuana legalization bill will be tabled this spring. He has also said that Ottawa will take its time to make sure they get it right. It now looks as if the elephant next door may have had more to do in driving Canadian marijuana stocks down than Mettrum and OrganiGram.
Trump’s new attorney general Jeff Sessions, well known for calling a white lawyer a race traitor for taking on a voting rights case, and as an anti-marijuana advocate, pronounced not once but twice last week, that he would enforce American federal marijuana laws in an appropriate way. This may open a rift between the states and the American federal governments because 29 states have legalized medical marijuana and 8 states have legalized recreational marijuana. Sessions has also been described as Donald J. Trump’s intellectual godfather.
Canadian marijuana stocks may have rebounded because Canadian producers have taken action to deal with the contamination issue. Mettrum and OrganiGram have both issued voluntary recalls. Their executive suites have also been reshuffled. The Cannabis Canada Association which includes almost every licensed medical marijuana producer has also voted for mandatory product testing.
At this point you may be asking yourself how is this going to affect companies like Tetra Bio Pharma (TBP:CSE) which is concentrating on scientifically developing and producing marijuana derived drugs for the treatment of chronic pain and other ailments. The simple answer is that this is a minor tempest in a minor teacup that won’t affect serious pharmaceutical companies. Companies like Tetra which are run by experienced research scientists with a history that includes bringing botanically derived drugs to market know that you can’t fudge the science. Tetra knows this well enough to be engaged in developing its own strain of marijuana to make sure that precise and scientifically measured doses will be delivered.
As for the marijuana companies listed on the TSX chances are that they will rebound as marijuana enthusiasts keep pushing the stock prices up. Remember, they have been waiting for this moment for 30 or 40 years.
As for the Emerys, they seem to be convinced that pot has already been legalized and simply not paid any attention to the numerous times the prime minister has said that until the marijuana laws are changed they remain in effect. We all know the market can be unpredictable but even so, it’s hard to believe the arrest of a well known gadfly, his wife and employees would drive up the price of what to all extents and purposes is an agricultural commodity. After all, people who break the law are arrested many times a day.
No, the recent Canadian arrests are more about market share and who gets to sell it rather than anything else. What the federal government has done is signal that it is not going to tolerate a wild west marijuana trade after legalization. In all probability the liberals will put in place a highly regulated sales environment to prevent criminal gangs from profiting.
Meanwhile, south of the border, American lawyers are advising their marijuana producing clients to remember to dot their i’s and cross their t’s. Just as Al Capone was finally sent to jail for income tax evasion they are suggesting that Sessions will launch his anti-marijuana jihad by prosecuting them for failing to meet labour standards, accounting standards or paying all their federal taxes. Sessions also has a history of playing fast and loose with the law. As a prosecutor in Arkansas he had a history of filing indictments against Democrats who had a chance to win against Republican candidates in local elections.