Canadian Marijuana Stocks Are Getting High Again

Canadian marijuana stocks are blazing again, fueled by speculation that the regional government of Quebec will rollout plans for recreational pot. Investors have quickly seized the opportunity by focusing on local producers primed to meet what’s expected to be insatiable demand for the green plant.

Quebec Readies Cannabis Legalization Bill

Quebec is planning to table its bill on cannabis legalization as early as Wednesday, according to sources familiar with the matter. The bill will answer important questions about marijuana consumption in Canada’s only French-majority province, including the legal age limit, how it will be distributed and the rules for drivers. Early reports suggest the province will adopt a ‘zero tolerance’ approach to driving while high.

The province says that cannabis legalization is a federal government initiative, and that it is up to Ottawa to cover expenses related to prevention and health costs.

“The legalization that the federal government is doing, we’ve got to have the money that it’s going to cost the provinces to give a lot of services to the people, especially the youth,” Quebec’s Public Health Minister Lucie Charlebois said Monday.

Pot-Craze Reaches New Highs

Marijuana stocks rose across the board Monday, with Aurora Cannabis (ACBFF) adding nearly 28% en route to new record highs. The stock has now gained more than 90% this month on rising revenue and a strong position in Quebec’s local cannabis market. The company’s provincial pot-growing facility recently received a cultivation license, giving it a strong foothold in French-speaking Canada.

Other solid performers on Monday included OrganiGram Holdings (OGRMF), Maricann Group (MRRCF) and Cronos Group (MJN), which added between 12% and 15%.

Most major Canadian marijuana stocks can be bought and sold on Over the Counter (OTC) markets.

Canada’s Marijuana Index

After a volatile summer, Canada’s Marijuana Index is catching fire once again, with prices fast approaching record levels. On Monday, the index shot up 9.5% to close at $351.74. That was also the highest since April.

Canada’s Marijuana Index has 18 constituents with a combined market cap of $8.07 billion.

By comparison, the United States Marijuana Index has 17 companies listed with a total value of $4.98 billion.

Pot Frenzy Likely to Grow

The euphoria surrounding Canadian marijuana stocks will likely to grow as the nation awaits the planned legalization of recreational weed on July 1. Companies that identify with recreational cannabis are surging, with recent gains far outpacing counterparts in the medical pot industry.

Various estimates show Canada will be home to a multi-billion-dollar pot industry in a matter of years. According to Deloitte, pot legalization will generate $22.6 billion annually for the industry, outpacing the total annual spend on alcohol (and Canadians love their beer).

Ontario, which is Canada’s most populous province and main economic hub, is considering a price of $10/gram for recreational pot. The province alone could generate an additional $100 million in annual gross tax revenue from the green plant. Policymakers say they would like to maintain some form of price uniformity across the country, suggesting that closer collaboration with the other provinces is in the works.

According to Canada’s parliamentary budget officer, the average price of weed in Ontario is $8.64 a gram.

In September, the government of New Brunswick reached a deal with two suppliers for about 9,000 kilograms of weed in the first year of legalization. That deal alone is expected to generate between $80 million and $100 million in total retail revenue.

If we use Colorado as a case study, Ontario should easily generate much more than the $100 million target. The U.S. state, which has less than half the population of Ontario, raked in $102 million U.S. in tax revenues from pot in 2014-15. Revenue more than doubled to $223 million in 2016-2017 based on a 15% sales tax.

Featured image courtesy of Shutterstock. 

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi