Shares of Cronos Group (CRON 0.96%) rose 49.3% in January, according to data provided by S&P Global Market Intelligence, as investors looked to the U.S. Senate runoff elections in Georgia that kicked off the new year, hoping the outcome would signal a better chance for marijuana legalization.
While a growing number of states have legalized marijuana, it remains a Schedule I drug at the federal level, on par with heroin, LSD, and ecstasy. The classification is an impediment to recreational use as well as broad adoption of marijuana- or cannabidiol-based foods and beverages.
Moreover, producers like Cronos Group are not able to fully access financial resources, as many banks will not lend money to them because of marijuana's status.
With both Georgia races going to Democrats, giving them full control of the Senate, the House of Representatives, and the White House, and with President Biden having campaigned on the promise of decriminalizing marijuana, there is a much greater likelihood of it happening.
The question, of course, becomes just how fast this can happen. Cronos has financial support from Altria (MO -0.05%), which invested $1.8 billion in 2018 for a 45% stake in the company, though this has mostly been a forgotten investment for the tobacco giant.
Marijuana legalization could spur Altria to ramp up product development with Cronos Group that would allow both to profit from a new era of opportunity.