Shares of Cronos Group (NASDAQ:CRON) soared 14.1% as of 3:16 p.m. EST on Monday. The marijuana stock appeared to receive a boost from U.S. attorney general nominee William Barr's written response to questions from the Senate Judiciary Committee. In this response, Barr confirmed his previous testimony before the committee that he would not target cannabis businesses that comply with individual states' marijuana laws.
Cronos wasn't the only Canadian marijuana stock to jump after Barr's written pledge made news. Several of the company's peers also enjoyed nice gains on Monday, including Aurora Cannabis, Canopy Growth, and Tilray.
But none of the other top marijuana stocks moved as much as Cronos did. That's possibly because Cronos claims a lower market cap than others and could be perceived as a more attractive bargain by investors.
There's also the fact that -- other than Canopy Growth, which claims a market cap more than five times greater than Cronos -- only Cronos Group has landed a big investment from a major partner outside the cannabis industry. In December, tobacco giant Altria bought a 38% stake in Cronos for $1.8 billion.
Did the written statement from Barr justify such a major rise for Cronos? Not really. As of now, Cronos and the other major Canadian marijuana growers can't establish operations in the U.S. marijuana market and retain their listings on U.S. stock exchanges or the Toronto Stock Exchange.
However, Barr's written response indicates that the Trump administration won't be hostile toward the cannabis industry. That's potentially good news for Canadian companies that plan to enter the U.S. hemp market following the recent legalization of hemp in the U.S. It also reinforces optimism that the administration might support congressional efforts to revise federal laws in a way that would allow Canadian companies to legally operate in the U.S. marijuana market.
Investors will certainly want to watch if Cronos Group makes any moves to enter the U.S. hemp market. Such an expansion would likely be made in lockstep with Altria.
In the meantime, the most important thing for Cronos is executing on its strategy in the Canadian recreational marijuana market. The company posted huge revenue growth in Q3, but its numbers didn't include any sales from recreational marijuana products. When Cronos reports its next quarterly results, investors should have a lot more to cheer about.