Marijuana stocks tumble over new Sessions rules
Domestic marijuana stocks rose Friday, but they remain down overall since Attorney General Jeff Sessions announced new Justice Department rules allowing for prosecutions against state-legal marijuana businesses.
The U.S. Marijuana Index, comprised of 15 publicly traded companies directly involved in the legal marijuana industry, had lost roughly 25 percent of its value from the close of trading on Wednesday to opening Friday, driven by investor anxiety over what the new policy would mean for marijuana businesses. The stocks clawed back about one-third of those loses Friday as the index rose just more than 10 percent.
The industry appears to be taking a cautiously optimistic wait-and-see approach with regard to the new federal rules.
“There has been no indication for a widespread directive to cease and desist state-regulated cannabis markets, and we expect law enforcement priorities to remain status quo,” said Matt Karnes of Greenwave Advisors, an industry financial firm, in an email.
However, investors are likely to see how things shake out before pouring more money into the industry. “We think the confusion caused by the Sessions rescission will arguably lead many investors to remain cautiously observant from the sidelines,” Karnes added.
“This is a speed bump in the industry,” said Jesse Peters, CEO of Eco Firma Farms, a marijuana growing business. “There is no coincidence that this announcement came three days after California implemented sales to adults 21 and over. It is an attempt by the current administration to slow the flow of cash from investors into a state that can make an unstoppable dent in full legalization.”
The loosening of state regulations in the past two decades have created a growing marijuana industry involved in everything from the production to the sale to the consumption of the still federally illicit plant. Industry sources estimate that sales in 2016 topped $6.7 billion, and that the industry employed between 165,000 and 230,000 workers last year.