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Canopy Growth advances timeline for U.S. entry to 2021: CEO

Jeff Lagerquist
·4 min read

Canopy Growth’s CEO (WEED.TO)(CGC) has advanced his timeline for the Canadian pot giant’s full entry into the United States market to 2021 from 2022. David Klein’s revised expectations follow a shift in the balance of power in the U.S. Senate. The slim majority won by the Democrats signals an easier path towards federal legalization south of the border.

The CEO of the largest cannabis company by market value, told Yahoo Finance Live’s Zack Guzman and Akiko Fujita on Thursday that he was surprised by Raphael Warnock and Jon Ossoff’s Senate win, which gives the Democrats a slim majority for the first time since 2011.

“We fully expect some variants of the MORE Act to make its way through both houses of Congress in 2021 as part of maybe a more comprehensive set of social justice initiatives that we would expect to see coming out of a Democratic controlled Senate and House,” Klein said in the interview.

The MORE Act would fully remove cannabis from the Controlled Substances Act, eliminating the disconnect between states where cannabis is legal for medical and recreational use, and Washington’s categorization of cannabis as an illegal Schedule 1 drug.

Klein told Yahoo Finance Canada in June that he expected the U.S. cannabis market to open up at the federal level as early as 2022.

Smiths Falls, Ont.-based Canopy has a deal in place to enter the U.S. market when cannabis sales are federally permissible through the acquisition of multi-state operator Acreage Holdings (ACRHF). The company also owns a stake in TerrAscend (TER.CN), a U.S.-focused cannabis firm.

Cowen analyst Vivien Azer expects passage of the MORE Act is less likely than the STATES Act, which would recognize U.S. state laws that have legalized cannabis through their legislatures or citizen initiatives, falling short of full federal legalization.

“We think full legalization would be a bit too progressive for some moderate democrats in the Senate,” she told Yahoo Finance Live’s Zack Guzman and Akiko Fujita on Thursday.

“We don’t have visibility around the timing of the STATES Act, but we would anticipate the back half of 2021 or the first half of 2022. But what we have asserted is we think there could be as much as 50 per cent upside to the revenue multiples for the U.S. operators, strictly by virtue of re-listing to U.S. exchanges.”

The Canadian Securities Exchange, one of Canada’s most junior bourses, has become the primary place of listing for U.S. cannabis producers while the drug remains federally illegal in that country.

Canaccord Genuity analyst Matt Bottomley said U.S. cannabis valuations, tracked by the Canaccord Genuity US Cannabis Index, saw about a seven per cent increase on Wednesday, as investors viewed the stateside developments as a de-risking event for the notoriously volatile sector. He expects U.S. pot stocks have more room to run as the U.S. inches closer to full legalization.

“We believe [this] leaves plenty of room for additional upside given strong fundamental performance and the sector's expected high growth profile in the coming years,” he wrote in a note to clients late Wednesday.

Cannabis stocks pushed higher again on Thursday, adding to Wednesday’s momentum from the Democrats’ win in a key U.S. Senate race in Georgia.

Canopy and Leamington, Ont.-based producer Aphria (APHA.TO)(APHA) hit 52-week highs shortly after the start of trading on Thursday amid a broader cannabis sector rally. However, Toronto-listed shares of the two companies ended the trading day with only modest gains, up by 1.65 per cent and 2.45 per cent, respectively.

The Canadian-focused Alternative Harvest ETF (MJ) had climbed 2.66 per cent at the close of Thursday’s session, adding to a seven per cent daily gain on Wednesday. The AdvisorShares U.S. multi-state operator focused ETF (MSOS) had jumped 2.83 per cent by the closing bell, on the heels of a six per cent uptick yesterday.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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